Treasuries drift slightly higher, S&Ps heavy Bunds flat, Stoxx futures slightly higher Spain taps €4.5bn–€5bn across curve, should go well France taps €10bn–€12bn shorter dated OATs, large, lumpy pill to swallow OVERNIGHT Global markets have been largely quiet overnight, leaving Treasuries to drift little changed from their settle but slightly higher from when Europe went home. Bunds for their part are essentially unchanged. Stocks show S&Ps heavy, down a dozen points or 0.2%, while Eurostoxx50 futures are slightly higher, up 0.3%. Asian bourses feature the Nikkei down 0.9% and the CSI300 down 0.3%. The dollar is slightly lower, the index dipping to DXY106.52, and the yen is strong, rallying to USD/JPY154.71. The euro is modestly higher at EUR/USD1.0550 and the pound is unchanged at GBP/USD1.2651. Gold is slightly higher at $2,659.39 and is nearing the 50% retracement of this month’s sell-off, at $2,663.43. Oil is also slightly higher, Brent crude nudging up to $73.04. ECB comments feature as Banque de France governor Francois Villeroy de Galhau fretted over the risks for growth and added that any additional tariffs from the US under president-elect Donald Trump should not have a significant effect on inflation in Europe. Finally, the European Union announced late yesterday that this coming Monday’s auctions will be its last appearance for the year; the optional syndicate window for December has been cancelled. TODAY It’s another light day in terms of data with only the business climate from France and then eurozone consumer confidence due. A plethora of ECB speakers do feature, however, including Banque de France governor Francois Villeroy de Galhau, Executive Board member Piero Cipollone, Governor of the Central Bank of Cyprus Christodoulos Patsalides, ECB Chief Economist Philip Lane, and ECB Governing Council members Robert Holzmann, Peter Kazimir and Boris Vujcic. Hefty supply also features as Spain and then France come to market. The former will tap €4.0bn–€5.0bn of its 7/31, 1/37, and 7/42 bonds, the last being a green issue. The size has been pared back from €4.5bn–€5.5bn at the mid-October auctions, Spain remains everyone’s darling given relatively healthy growth, less fiscal stress, and relatively stable politics, and €57bn of bonds falling below one-year maturity (so dropping out of benchmarks) should all help as reinvestments get put to work, especially before month-end. France for its part will tap €9.0bn–€11.0bn of shorter dated OATs in an auction which looks like a large, lumpy pill to swallow. The size for this auction is also down, from €10.0bn–€12.0bn in October. Shorter dated OAT auctions are not normally a problem to take down, but France underperforming over the course of the day on Wednesday suggests investors are wary of the sovereign. Indeed, significant political uncertainty at a time of yawning fiscal needs contrasts sharply with the outlook for Spain; witness the ratings actions for each sovereign moving in opposite directions, Fitch revising its outlook for Spain to positive on November 8 (A–), while paring back its outlook for France to negative (AA–) on October 11, followed by Moody’s shifting its outlook for the sovereign to negative (Aa2) on October 25. As heavy as Bunds have traded from the beginning of October, the one thing which stands out on the charts is an upsloping trend from the lows earlier this month. That comes in today at 131.86, currently trading 132.02. It has been briefly broken a few times, but only by a few ticks and without much consequence. To the extent it holds, it will help keep Bunds stable and from breaking down again. To the upside, the 38.2% retracement of the sell-off from early October also remains in place on a closing basis, despite being broken by 26 ticks on an intraday basis this past Tuesday. One of these two feat
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