UK T-BILL AUCTION RESULTS: 1/3/6-month UKTBs

Hawkish repricing in the European front end has extended further, despite various ECB Governing Council members pushing back on the idea of acting quickly to any upside inflationary risks stemming from energy price increases related to the situation in the Middle East. Surging TTF prices a key driver.

• ECB-dated OIS now prices a little over 20% odds of a hike through June, with 10bp of easing priced through year-end.
• Euribor futures 3.0-15.0 lower at typing. ERZ6 is nearing the December low 97.790).
• The upside surprise in the Eurozone HICP helps maintain the hawkish pressure.

• Final spread guidance 2.90% Feb-36 Bund + 14.5 to 15.5bp (initial was + 14.5 to 17.5bp then 14.5 to 16.5bp)
• Maturity: 15 July 2036
• Size: E6-7bln (MNI expects the top of the range)
• Books approaching E26bln
• Coupon: 2.75%
• Settlement: Expected 5 March 2026 (T+2)
• ISIN: NL0015073VV8
• Timing: Pricing expected later today

From market source with MNI colour

• The USD's close correlation with energy prices has run further this morning - The USD Index is moving in lockstep with gas prices (both European and US contracts), all of which continue to press to new daily highs in recent trade, and again highlights the US economy's relative insulation to higher energy prices compared to cost push inflation-sensitive economies including GBP (G10's poorest performer today), EUR, PLN and HUF.
• The operation of QatarEnergy's Ras Laffan export facility remains a key driver here - it's closure yesterday could effectively cut off ~20% of global LNG supply - so any step toward reopening could alleviate the tight market and stem the gas price rally, thereby removing one of the primary drivers of the USD rally so far this week. 

Figure 1: USD Index moving in lockstep with European, US gas prices

Source: MNI / Bloomberg Finance L.P.

• GBP's sensitivity to higher energy prices is noteworthy, and will be contributing to the currency's underperformance today. EURGBP is higher on the day despite both territories being net natural gas importers. This is due to the UK's electricity prices being far more closely tied to the natural gas price relative to Europe. UCL research found that in the UK "gas set the electricity price 98% of the time, whilst generating just over 40% of electricity", far higher relative to the European average of gas setting the price 58% of the time, whilst generating 34% of the electricity.