GILTS: Away from Lows But Curve Still Steeper After PSNB Data
Sep-19 09:34
Gilts tick away from lows as oil markets soften and European equity benchmarks pull away from session highs.
- Gilt futures last -24 at 90.94 vs. session lows of 90.72.
- Yields now -1bp to +2bp, with the curve twist steepening.
- The September 5 high in 10-Year yields (4.716%) held, with that benchmark topping out at 4.715%, while the September 5 low in futures (90.65) went untested.
- Longer-dated UK paper continues to underperform Bunds in the wake of the higher-than-expected monthly PSNB figures that drove a sell off on the open, with the UK’s fragile fiscal situation underscored by the release.
- SONIA futures also off lows, last -2.5 to +0.5, while BoE-dated OIS shows ~6bp of easing through year-end after registering a fresh hawkish cycle extreme at ~5bp this morning.
- Outside of the PSNB release, retail sales data was in line to a touch firmer than expected (with negative revisions), while the IFS outlined the risks of a downgrade to the government’s productivity assumptions, which would provide fresh (but widely expected) fiscal headwinds.
- Not that the DMO confirmed that it will sell two lines (the 4.50% Sep-34 & 4.75% Dec-38 gilts) via PGT next week.
- Little of note on the UK calendar ahead of the weekend.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Nov-25 | 3.954 | -1.4 |
Dec-25 | 3.910 | -5.7 |
Feb-26 | 3.806 | -16.2 |
Mar-26 | 3.768 | -19.9 |
Apr-26 | 3.692 | -27.6 |
Jun-26 | 3.659 | -30.8 |
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OPTIONS: Expiries for Aug20 NY cut 1000ET (Source DTCC)
Aug-20 09:34
- EUR/USD: $1.1550(E915mln), $1.1600(E854mln), $1.1660-75(E1.4bln)
- USD/JPY: Y147.25-35($982mln), Y148.00-10($1.5bln)
- USD/CAD: C$1.3800($1.1bln), C$1.3835-55($872mln)
- USD/CNY: Cny7.1050($500mln)
RIKSBANK: Press Conference Ended: Balanced Signals For September
Aug-20 09:33
The Riksbank press conference has ended. Overall, it echoed the broad strokes of the policy statement/monetary policy update. We think the signals were quite balanced, in the sense that it’s not possible to rule in or out a September rate cut.
- Dovish signals on inflation (summer rise likely temporary) and growth (uncertainty lower, but still dampening activity) were offset by calls for inflation vigilance and a cautiously optimistic outlook for consumption and investment.
- Unsurprisingly, the data will guide future decisions.
RIKSBANK: Thedeen Pushes Back Strongly On Question On 50bp Rate Cut
Aug-20 09:28
Thedeen pushes back strongly on a question around a 50bp rate cut, pointing to the June rate path which has some probability of a 25bp cut.
