ITC F.I. : Bund calls. SPGB, OAT & Gilt linker supply may cap Bund upside in s/t
ITC Fixed Income Morning Meeting: Buxl to open around 132.41, Bunds at 143.47, Bobls at 126.57, Schatz at 110.52, Gilts at 117.26 (Ref 132.14 TY)
- UST NY Recap: Mixed/Choppy Session, Equities Underpinned by strong bank results. Treasuries prices closed higher on Wednesday as 5y, 10y and 30y yields fell by 0.8bps, 1.4bps and 0.9bps, respectively. SPs caught an early bid as GS 4Q results were a strong beat ($5.60 vs. $3.66), JPM also reported, providing a small beat. A block steep'r printed ahead of the data (FVH 12691 at 124-09 done vs. WNH 2687 at 160-25), suspected flat'r unwind from Jan 9th. Economic data was broadly in-line, Dec CPI printed at 0.1% m/m (vs. 0.2% exp), and Dec IP fell to 0.3% m/m (vs. 0.3% exp). Post data, we heard a few rounds of short covering from macro and FM all across bonds, 10s and TY, RM bought the belly and there was some very good 2-way there from CBs. The FHLMC deal priced $5.5bn 5y which saw the sector knocked lower. The long-end Fed purchase (details below) was aggressively offered, allowing a steepening move, with 5s30s by over 1bp just 15 minutes after the operation. Early afternoon was quiet bits and pieces of RM buying. Better REC out of HF and RM in the long-end of the swap close, provided the back-end some support.
- USTs and Swaps in Tokyo: Futures are driving the rally, little seen in cash space. Talk RV REC 10yr US vs JPY. USTs are underpinned by weak S&P futs, -/3.50 at 1462.10, and on the reversal of the USDJPY, now off -18 at 88.33.
- AGB: Australian employment report came in weaker than expected. Aussie 3's +7bps- another short squeeze/bull flattening. IBG3 now price 42% probability of a 25bps rate cut in Feb
- US Fed Ops: the Fed is due to purchase $2.75-3.5bn in the 8-10y sector, covering 02/20-11/22 maturity bucket.
- European Fixed Income: Bunds to open around 143.47 +7, Ref 132.13+ TY.Spa, Fra & UK Supply / BoE Tucker
At 09:30GMT, Spain will tap the 3y 3.75% 10/15 Bonos, reopen the 5y 4.5% 01/18 Bonos, and tap the 29y 4.7% 07/41 Bonos for a combined €3.5-4.5bn (equivalent to 26k Bund futures).
At 09:50GMT, France will reopen the 2y 2.5% 01/15 BTAN, reopen the 4y 3.75% 04/17 OAT and sell a new 5y OAT 1.0% 05/18 OAT for a combined €7.0-8.0bn (equivalent to 26k Bund futures).
At 10:30GMT, the UK will tap the 17y 0.125% 03/29 Gilt Linker for £1.0bn (equivalent to 18k Gilts future) At 10:30GMT, Ireland will sell 3 month bills for €0.5bn.
At 10:50GMT, France will tap the 5y 0.25% 07/18 OATei, tap the 6y 1.3% 07/19 OATi and tap the 14y 1.85% 07/27 OATei for a combined €1.3-1.7bn (equivalent to 9k Bund futures).
- Euribor & OTC: There is nothing scheduled for today.
- Economic Releases:
At 10:00GMT, the Eurozone will release the Construction output for November which was -1.6% m/m previously and -4.1% y/y previously.
- Speakers/Other Events:
At 09:00GMT, BoE's Tucker (Leaning Hawk) will speak at a conference in London.
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