GILTS: Away From Early Highs As Equities & Crude Tick Higher
May-30 09:37
Gilts trade away from early session highs, with a bounce in crude oil and European equities countering the early bid that seemed to centre on a U.S. federal appeals court allowing the White House to temporarily suspend the lower court's order that ruled most of President Trump’s tariffs illegal.
- Futures traded as high as 91.79 but have faded back to 91.60 last.
- Resistance at the May 20 high (91.87) remains untouched, with our technical analyst suggesting that recent gains in the contract only appear corrective.
- Yields now 0.5-2.0bp higher across the curve, 5s under the most pressure.
- 2s10s hovers around 64bp (little changed) vs. cycle closing highs of 78.5bp.
- 5s30s trades at ~125bp (-1.5bp on the day) vs. cycle closing highs of 138.6bp.
- Note that the DMO’s FQ2 (July to Sep) issuance plan broadly met our expectations, details available in an earlier string of bullets.
- Month-end projections for gilt benchmarks point to mild reductions of index duration.
- SONIA futures -1.0 to +2.5, light twist flattening on the strip.
- BoE-dated OIS little changed vs. opening levels, showing ~38bp of cuts through year-end.
- Late Thursday/overnight comments from BoE’s Bailey & Taylor were not market moving.
- There is little of note on the UK calendar for the remainder of today, which will leave focus on cross-market and macro/tariff cues.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.217 | +0.6 |
Aug-25 | 4.103 | -10.7 |
Sep-25 | 4.057 | -15.4 |
Nov-25 | 3.909 | -30.1 |
Dec-25 | 3.835 | -37.6 |
Feb-26 | 3.725 | -48.6 |
Mar-26 | 3.707 | -50.4 |
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GILTS: Early Rally Extends
Apr-30 09:37
Gilts extend on their early rally, after weaker oil prices (on the day) and a pullback from yesterday’s highs in e-minis provided background support for wider core global FI markets at the open.
- Futures have traded as high as 93.72, further establishing the recent bullish move. Our technical analyst’s next resistance level is located at 94.00.
- Yields 2.5-5.5bp lower, curve flattens.
- 10s are below the 4.460% yield support level we have identified in recent days, with the next downside level of note coming in at the trendline support drawn off the Dec 8 ’21 lows (4.411%).
- 2s10s and 5s30s continue to hold above 60bp & 120bp, respectively.
- Modest outperformance vs. Bunds allows the move below 200bp in the 10-Year yield spread to extend a little further, last 197.5bp, probing support at 197.4bp.
- The GBP4.5bn 4.375% Mar-28 gilt auction generated a solid cover ratio, tight tail and LAP that topped pre-auction mids.
- BoE MPC member Lombardelli will appear at 16:30 BST, although scope for meaningful monetary policy comments may be limited by the nature of her appearance, as she launches the Bank’s new economics teacher training partnership with Manchester University.
- ~94bp of BoE cuts priced through year-end vs. April extremes of ~97bp.
- Next 25bp cut fully discounted for next month.
- SONIA futures flat to +4.5, given the rally in gilts.
- Expect macro cues (tariff headlines, European national level inflation data and U.S. economic data) to set the tone for most of the day.
- Month-end index extension projections for gilts are modest at best.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.203 | -25.6 |
Jun-25 | 4.071 | -38.8 |
Aug-25 | 3.859 | -60.0 |
Sep-25 | 3.731 | -72.8 |
Nov-25 | 3.575 | -88.4 |
Dec-25 | 3.517 | -94.2 |
GERMAN AUCTION RESULTS: 2.60% May-41 Bund / 2.50% Jul-44 Bund
Apr-30 09:35
| 2.60% May-41 Bund | 2.50% Jul-44 Bund | |
| ISIN | DE000BU2F009 | DE0001135481 |
| Total sold | E1.5bln | E500mln |
| Allotted | E1.143bln | E452mln |
| Previous | E1.135bln | E392mln |
| Avg yield | 2.80% | 2.83% |
| Previous | 3.08% | 2.74% |
| Bid-to-offer | 2.04x | 2.21x |
| Previous | 1.67x | 3.10x |
| Bid-to-cover | 2.68x | 2.44x |
| Previous | 2.21x | 3.95x |
| Avg Price | 97.47 | 95.23 |
| Low Price | 97.47 | 95.20 |
| Pre-auction mid | 97.452 | 95.171 |
| Prev avg price | 93.97 | 96.47 |
| Prev low price | 93.96 | 96.45 |
| Prev mid-price | 93.944 | 96.445 |
| Previous date | 26-Mar-25 | 22-Jan-25 |
FOREX: USD/JPY Struggles on Approach to Recovery High Ahead of GDP
Apr-30 09:26
- JPY is weaker against all others early Wednesday, however USD/JPY is yet to make any meaningful test on the Friday recovery high at 144.03. With tariff limbo still in place, and no trade negotiations to speak of between the US and China, G10 currencies are awaiting the next macro cue or headline to trade with any real conviction. That said, EUR/GBP continues its losing streak, with the cross hitting a new lower low of 0.8482 in overnight trade.
- Moves follow the cross trading through a major support area we flagged last week at 0.8520-31 - marking both the early April pullback low as well as the 50% retracement of the tariff-inspired upleg off 0.8323.
- Meanwhile, Australian CPI for Q1 came in toward the upper-end of expectations, helping AUD/USD recover well into the European morning. Spot faltered on the approach toward yesterday's 0.6450 highs, however, meaning the pair has traded either side of the 0.64 handle for eight consecutive sessions. The 200-dma defines the first topside level, at 0.6460.
- US data picks up Wednesday, with MNI Chicago PMI for April seen moderating further to 45.9 from 47.6 previously. Advance GDP, Personal income, spending and the latest PCE stats for March are also due. Central bank speak sees BoE's Lombardelli, ECB's Villeroy & Makhlouf as well as the BoC minutes. The Fed remain inside their pre-decision media blackout period.
