FOREX: Analysts Caution Over-interpretation Of AUD/CHF FX Reserve Swings

• Spread set earlier: 1.125% Nov-37 I/L gilt +11.75bp (guidance was +11.75/+12.25bps)
• Size: GBP5.5bln (MNI expect GBP3.5-5.0bln nominal )
• Books closed in excess of GBP61bln (inc JLM interest of GBP5.5bln)
• Maturity: 22-Sep-38
• Exp. Settlement: 11-Jun-25 (T+1)
• Coupon: 1.75% SA, ACT/ACT, short first to 22-Sep-25
• ISIN: GB00BMY62Z61
• Joint Leads: Barclays (B&D/DM), Citi, Nomura, RBC
• Timing: Books closed. Allocations and pricing to follow.

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Gilts remain underpinned after drawing support from softer-than-expected wage data and a larger-than-expected fall in payrolled employees.

• Downticks in e-minis and European equity indices provided further support (but lacked an overt driver), even with the FTSE 100 benefitting from a softer GBP.
• Gilt futures traded as high as 92.66 before fading back to ~92.50, adding more than 70 ticks vs. yesterday’s settlement.
• Initial resistance located at the June 5 high (92.63) has been pierced, with bulls now looking to a Fibonacci resistance point (92.79).
• Yields 5-7bp lower, 10s outperform on the curve.
• 2-Year yields set for the lowest close seen since May 9, while 10s and 30s trade below their respective closes from the same day.
• 2s10s holds above 60bp, with recent moves below that level limited in scope and short-lived.
• 5s30s trade around 120bp after the recent run of closes below the level.
• GBP STIRs now fully discount the next 25bp cut come the end of the September MPC, with 48bp of cuts showing through year-end (vs. 41bp late yesterday). Labour market data drives things there.
• Books on the 1.75% Sep-38 I/L gilt syndication are closed, with demand nearing ~GBP60bln ~15 minutes before books closed (per bookrunners).
• Macro matters are set to dominate for the rest of the day, with domestic inputs (comments from BoE’s Saporta & the government spending review) set to come back to the fore tomorrow.