GILTS: Away From Highs As Bunds Falter, Fiscal Questions Eyed
Mar-14 09:40
Gilts continue to hold off session highs, largely owing to weakness in Bunds.
- Futures +14 at 91.81, 91.76-92.03 range seen thus far.
- Initial support and resistance in futures sits at 91.07 & 92.63, with the bearish technical theme intact.
- Yields 1bp lower to 1bp higher, curve twist steepens.
- 50bp and 100bp continue to cap 2s10s and 5s30s curves, respectively, on a closing basis.
- 10s ~2.5bp tighter to Bunds after trading between 175-185bp over the past couple of sessions, failing to breach the support cluster at 175.0/174.5bp.
- BoE-dated OIS not showing much movement since the gilt open, 55.5bp of cuts priced through year-end.
- No impact from the uptick in the latest BoE/Ipsos consumer inflation expectations data,
- We noted earlier that while this morning’s softer-than-expected GDP data isn’t a needle mover for the BoE, at least in isolation, it will provide further fiscal headwinds.
- This comes as reports suggest that Chancellor Reeves is already receiving meaningful cabinet level pushback against her tabled welfare cuts, potentially limiting her room for manoeuvre.
- Macro cues set to dominate into the weekend.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.457 | +0.2 |
May-25 | 4.269 | -18.6 |
Jun-25 | 4.210 | -24.5 |
Aug-25 | 4.065 | -39.0 |
Sep-25 | 4.019 | -43.5 |
Nov-25 | 3.923 | -53.2 |
Dec-25 | 3.900 | -55.5 |
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EGB SYNDICATION: France new 30-year OAT: Revised Guidance
Feb-12 09:38
- EUR Benchmark (MNI expects a E8-10bln size) of the new May-56 OAT
- Revised guidance: May-55 OAT +5bps +/-1 WPIR (was + 7bps area)
- Books above €100bn (including €2.84bn JLM interests)
- Issuer: Republic of France
- Ratings: Aa3 (Moody’s Stable)/AA- (S&P Stable)/AA- (Fitch Negative)/AAh (DBRS Stable)
- Format: OAT (in dematerialised book entry form), RegS Cat 1, 144A eligible, CACs
- Maturity: 25 May 2056
- Settlement: 19 February 2025 (T+5)
- Coupon: Fixed, annual ACT/ACT, payable each 25 May. Full first coupon on 25 May 2025
- Bookrunners: BNPP (DM and B&D) / Citi / DB / JPM / SG
- Timing: Books open, today's business
Details from market source
GBP: Negative Markets Bias May Provide Asymmetric Risks Around UK Data Ahead
Feb-12 09:35
GBP/USD's strong rally off yesterday's lows means the pair has now retraced over 50% of the post-BoE decision losses, putting the price within 100 pips of last week's highs.
- This signals that markets are taking Mann's views at face value this week - and that her vote for 50bps last week isn't the beginning of series of votes for aggressive easing given her preference for restrictive policy (we gauge bank rate as being ~100bps above her top estimate of neutral, therefore leaving little room for sizeable cuts).
- More broadly, the negative bias toward GBP/USD persists. Our CFTC positioning dashboard has GBP's 52w Z-score at -1.52, signalling positioning momentum is the second most-negative in G10 after NZD. This is reflected in the bias toward downside protection in GBP/USD this year: the shift lower for 3m risk reversals in January has largely stuck, mirrored in demand for OTM puts - we've tracked near $3bln cumulative notional traded across 1.22 puts in the past month, again cementing the market's concern over GBP downside risks.
- It's these factors that may provide asymmetric upside risks to GBP on strong data releases ahead - particularly data covering consumption, a driver of the weak demand that helped trigger Mann's vote for 50bps last week. Prelim Q4 GDP data crosses tomorrow morning.
EQUITIES: EU Bank Vol trade
Feb-12 09:34
SX7E (17th Apr) 170^, sold at 11.10 in 6k.
