US TSY FUTURES: BLOCK: Second Consecutive Mar'26 30Y Ultra-Bond Sale

The S&P Global US services PMI was revised lower in the final November release, dipping to its lowest since June rather than confirming what had been its highest since July. Along with this downward revision, input cost inflation was also trimmed from the highest since Jan 2023 in the flash to today’s six-month high, but as you can see in the chart below that's a close call having still seen a solid acceleration in November. 

• US Services PMI: 54.1 (flash & cons 55.0) in Nov final after 54.8 in Oct
• US Composite PMI: 54.2 (flash 54.8) in Nov final after 54.6 in Oct

S&P Global US PMI press release opening highlights (release in full, here): 

• “The US private sector services economy continued to expand at a solid pace in November, despite growth softening to a five-month low, according to the latest PMI® survey data from S&P Global.”
• “Activity was supported by the firmest rise in new work of 2025 so far, whilst confidence in the outlook strengthened following the end of the government shutdown and expectations of improved economic growth in the year ahead.”
• “Firms also took on additional staff to a stronger degree amid some evidence of capacity pressures, but with reports of higher labor costs and tariffs continuing to push up prices in general, input cost inflation accelerated to a six-month high.”

• Little reaction in Treasuries after modest decline in S&P Global Services/Composite PMI data.
• Near early morning highs, TYH6 trades 113-03.5 (+7) vs. 113-07 high, still south of initial technical resistance at 113-11/22+ High Dec 1 / High Nov 25.
• Curves mildly steeper: 2s10s +.155 at 57.596, 5s30s +1.570 at 110.437.
• Next up: SM Services data at 1000ET.

Long end UK swap spreads have widened further this week, even with 30-Year gilt yields little changed since the market close that followed the Budget.

• This points to a consistent post-Budget reduction in UK fiscal risk premium, with the 30-Year swap spread nearing the October ‘24 closing high (-74.99bp).
• While medium-term fiscal risks remain evident (with a particular focus on the backloaded nature of the fiscal tightening outlined in the Budget) the market has welcomed the (questionable) increase in fiscal headroom and ongoing WAM reduction in issuance, promoting swap spread widening.
• 30-Year swap spreads have rallied by ~10bp since the November 20 close, a break of the aforementioned October ’24 high would switch focus to the clustered resistance area at -70bp/-69.96bp and -69.71bp.
• It seems that a fresh gilt-negative catalyst is a pre-requisite for any fresh spread narrowing at this point e.g. slower-than-envisaged UK growth, political unrest or fresh questions surrounding the UK fiscal outlook.

Fig. 1: UK 30-Year Swap Spread (bp)

Source: MNI - Market News/Bloomberg Finance L.P.