BUNDS: Rabobank Question Long-Term Risks Election Poses
Ahead of the German election Rabobank note that “over the longer run, we are sceptical that looser spending constraints in Germany will weigh on the country’s safe haven debt.”
- While they concede that there are near-term risks surrounding the loosening of the debt brake (contingent on the outcome of the election), they highlight two matters supporting their longer run view:
- “First, we do not see such a scenario obviating the fact that the country’s structural problems are set to weigh on economic growth for some time to come.”
- “Second, the diminished nature of Germany’s free float (vs. pre-QE norms) argues that there is substantial headroom in terms of additional issuance before the market struggles with absorption.”
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OUTLOOK: Price Signal Summary - EUROSTOXX50 Bull Cycle Extends
- In the equity space, S&P E-Minis are trading higher this week, marking an extension of last week’s bull phase. Gains undermine a recent bearish theme. The contract has traded through the 50-day EMA and attention is on resistance at 6107.50, the Dec 26 high. It has been pierced, a clear break would strengthen a bullish theme. This would open 6178.75, the Dec 6 high and key resistance. Initial support to watch is 5961.75, the Jan 16 low.
- A bull cycle in the EUROSTOXX 50 futures contract remains intact and the contract is trading higher again, today. Last week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The focus is on a climb towards 5261.75, 1.236 projection of the Nov 21 - Dec 9 - 20 price swing. Initial firm support lies at 5035.87, the 20-day EMA.
STIR: Mix Of Positioning Swings In SOFR Futures Early This Week
OI data points to two distinct groups of positioning swings between Friday and Tuesday settlement, as the SOFR futures strip twist flattened.
- A mix of net long cover and short setting out to SFRH6.
- Short cover then dominated in SFRH7 through SFRU7, as well as in SFRH8.
| 21-Jan-25 | 17-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,074,245 | 1,081,078 | -6,833 | Whites | -23,878 |
SFRH5 | 1,171,685 | 1,169,577 | +2,108 | Reds | +71,578 |
SFRM5 | 1,013,084 | 1,001,937 | +11,147 | Greens | -9,020 |
SFRU5 | 785,951 | 816,251 | -30,300 | Blues | -1,247 |
SFRZ5 | 993,979 | 980,033 | +13,946 |
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SFRH6 | 685,917 | 640,434 | +45,483 |
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SFRM6 | 659,503 | 650,621 | +8,882 |
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SFRU6 | 616,484 | 613,217 | +3,267 |
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SFRZ6 | 708,189 | 706,589 | +1,600 |
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SFRH7 | 488,348 | 494,931 | -6,583 |
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SFRM7 | 405,083 | 407,024 | -1,941 |
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SFRU7 | 294,429 | 296,525 | -2,096 |
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SFRZ7 | 268,748 | 267,835 | +913 |
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SFRH8 | 208,702 | 217,539 | -8,837 |
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SFRM8 | 175,026 | 171,574 | +3,452 |
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SFRU8 | 113,306 | 110,081 | +3,225 |
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EQUITIES: EU Bank call spread
SX7E (21st Mar) 158/165cs, bought for 2.65 in 7k vs 1.61k at 157.20.
