GILTS: A Little Firmer As Trade Questions Linger, 20s See Decent Demand
Apr-24 09:36
Gilt futures have ticked higher but remain comfortably within yesterday’s range, mimicking moves in wider core global FI markets.
- Initial support and resistance defined at the 20-day EMA (92.02) & April 23 high (93.32), respectively.
- Yields 1.5-2.5bp lower, 5s outperform after aggressive twist flattening on Wednesday.
- 10s failed to hold the break below 4.50% yesterday, leaving the long-term uptrend (which intersects at 4.393% today) and the April low (4.363%) unchallenged.
- 10-Year spread to Bunds is essentially unchanged, consolidating most of yesterday’s ~5bp narrowing, last 206bp. A reminder that 200bp was not tested during yesterday’s spread tightening.
- China’s pushback against the idea of Sino-U.S. trade talks being underway has removed some of the optimism that followed comments and source reports out of the U.S. over the last 36 hours.
- 20-Year gilt supply was met by decent demand, probably aided by yesterday’s reduction in the long bucket allocation within the DMOs revised gilt remit.
- BoE-dated OIS prices 88bp of cuts through year-end, ~2.3bp of additional cuts vs. yesterday’s closing levels. A reminder that recent dovish extremes showed ~97bp of cuts over that horizon.
- SONIA futures 0.5-5.5 firmer.
- Looking ahead, BoE MPC member Lombardelli will appear on a panel this afternoon (14:00 BST).
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GILTS: Lower On Cross-Market Cues, Supply Due Shortly
Mar-25 09:36
Gilts to fresh session lows as the data-driven weakness in Bunds applies fresh weight.
- An uptick in European equities (driven by hope of U.S. tariff reprieve, as well as some stock/sector specifics), higher oil prices and hawkish Fedspeak provided cross-market pressure at the open.
- Lows of 91.06 seen so far, with bears trying to force a clean break of initial support at the Mar 13 low (91.07). The bearish technical structure remains intact.
- Fresh extension lower would target the Mar 6 low and bear trigger (90.71).
- Yields 2-3bp higher across the curve, light steepening seen.
- On the supply front, the DMO will come to market with GBP2bln of the 4.75% Oct-43 line this morning.
- Little else of note on the domestic calendar until tomorrow’s CPI & Spring Statement.
- Expect our detailed previews of those events to cross throughout today.
- As noted earlier, the FT has pointed to over GBP5bln of spending cuts in tomorrow’s Statement given the erosion of the fiscal headroom outlined in the Autumn Budget, while the OBR is set to slash its ’25 GDP growth forecast to ~1%.
- GBP STIRs see modest hawkish repricing given the weakness in the long end, with 41bp of cuts priced through year-end vs. ~43bp late yesterday. SONA futures flat to -2.0.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.315 | -14.1 |
Jun-25 | 4.285 | -17.1 |
Aug-25 | 4.191 | -26.5 |
Sep-25 | 4.147 | -31.0 |
Nov-25 | 4.072 | -38.5 |
Dec-25 | 4.046 | -41.0 |
SONIA: Call fly seller
Mar-25 09:34
SFIU5 95.45/95.75/96.05c fly, sold at 9.75 in 5k.
US TSY OPTIONS: TYK5 109.00 Puts Lifted
Mar-25 09:32
TYK5 109.00 puts paper paid 0-15 on 3K.
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