BUNDS: /SWAPS: Commerzbank Reiterate Shorts In Long End ASWs
Commerzbank write “although Schatz ASW spreads remain resilient, Bund ASWs are hitting new lows and even underperform against 30s as markets prepare for persistent fiscal slippage under the new German government. As the game of brinkmanship for fast-tracking new expenditures gathers pace, more volatility could be in store, but Bunds will struggle to regain their 'special' status, regardless of the eventual legislative details to free up fiscal space”.
- They suggest that “combined with converging duration free-floats across the 'pristine' global bond markets this implies further catch-up with U.S. Treasury and Gilt ASW structures”.
- Therefore, they reiterate structural shorts in (ultra-)long Bund spreads, both outright and vs. Schatz.
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US TSYS: Post-New Home Sales React
- Treasury futures holding near recent session lows, little reaction to better than expected new home sales for December. Still bid, futures have scaled back overnight risk-off support on weaker stocks tied to China's DeepSeek AI startup.
- Treasury Mar'25 10Y futures currently +16 at 108-31 vs. 109-12 high - just below initial technical resistance of 109-12.5 (50-day EMA).
- Cross asset comparison, stocks are weaker but well off lows (SPX Eminis -103.0 at 6029.50), Gold weaker (-27.33 at 2743.23), US$ index off lows (BBDXY +.21 at 1295.37), volatility index gaining (VIX +3.61 at 18.46).
- Focus remains on Wednesday's FOMC policy annc, as well as heavy corporate earning's docket this week.
JPY: FX Exchange Option
FX Exchange traded option, looking for further Yen Strength.
- JPYUSD (7th Mar) 67.5c, bought for 0.23 in 1.3k.
The underlying is at 65.175, spot is slightly lower at 0.006481.
EQUITY TECHS: E-MINI S&P: (H5) Pullback Extends
- RES 4: 6200.00 Round number resistance
- RES 3: 6178.75 High Dec 6 and key resistance
- RES 2: 6163.75 High Dec 16
- RES 1: 6105.25/6162.28 Intraday high / High Jan 24
- PRICE: 6036.00 @ 14:58 GMT Jan 27
- SUP 1: 5961.75/5948.00 Low Jan 16 / Intraday low
- SUP 2: 5943.94 61.8% retracement of the Jan 13 - 24 bull leg
- SUP 3: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 4: 5809.00 Low Jan 13 and a key support
The S&P E-Minis contract initially started the week on a bearish note, extending the pullback from Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement. This would open 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
