Halister News

(Bloomberg) -- Bund futures dip off the open, though erase losses supported by gilts after U.K. PM May signals willingness for a hard Brexit in order to gain control of immigration. Wave of financial/covered bond issuance continues.

• U.K. 10y yield drop 3.5bps to 1.35% as short sterling strip bull flattens
  • RBC recommends buying gilts on a cross-market basis given upcoming positive cash-flow environment (large coupons, redemptions), while Brexit-related uncertainties may weigh on economic prospects
• Peripheral bonds bounce led by Portugal, 10y yield drops 8bps, as some of last week’s losses are pared
  • Seems concession was overdone ahead of expected syndicated supply, says one London-based trader
  • Flows mixed overall, with two-way flow in 10y BTP, says a second trader based in London
• Another wave of covered bond/financial deal pricing due this afternoon, focused in the 5-10y sector, which may offer support; full list here
• Analysts focus on EGB supply and recent improvements in inflation data, while most are low conviction on outright duration, there is a consensus steepener view on the curve

• NOTE: Excel heat map of euro-area govt bond curves and spreads here

YIELDS:

• German 10Y yield steady at 0.30%; March bund futures +9 ticks at 162.93
• Italy 10-year yield -6bps at 1.90%, Spain -6bps at 1.48%, Portugal -9bps at 3.96%

Bund-future technicals (roll-adjusted):

• Resistance 163.05 (daily pivot), 163.23 (Jan. 6 mid open/close price), 163.44-50 (pivot r1, Friday point-of- control)
• Support 162.43 (50% of Dec. 8- Jan. 2 rally), 162.04 (Dec. 19 low), 161.82 (Dec. 16 low)
  • For overnight news and what to watch, see EU FX/Rates daybook