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US issuers were instrumental in making 2016 a record breaking year for Euro-denominated corporate supply . See previous comment US Euro corp supply to ease in 2017 despite busy start?

That's partly been predicated on push (M&A) as well as pull factors (widening GER/US rate differentials).

Largely thanks to higher US yields, the GER/US 10yr differential is ending the year at its most extreme level since the inception of the Euro, amplifying the allure of Euro markets for US issuers who do not swap the proceeds back to dollars.

But could that relative differential become even more extreme in 2017? Charts suggest they could where our technical team highlight the following;

  • The spread has accelerated the 8yr uptrend via a 22 month symmetrical triangle (completed in August) to reach Monday's 230 Euro-era high
  • Immediate upside drive appears to be losing traction (note bearish daily RSI/Momentum divergence) and given the recent peak's close proximity to the triangle target at 228, potential is seen for a near term pullback
  • However, any dips are viewed as corrective and should hold 212/200 (25 Nov former high/7 Dec higher low), allowing a resumption of the long term uptrend
  • Bullish weekly/monthly studies concur and a sustained clearance of 230 would target 256 (1.618 Fibonacci projection of -89/90 off -33)

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