US TSYS: Bonds Recede After House Passes Revised Tax/Spendingf Bill

• An updated gilt remit is expected tomorrow following the release of the UK public sector finance data which will confirm the CGNCR outturn for 2024/25. There is an expected release time of 7:30BST (this is not confirmed but is the precedent set in previous years).
• Expectations are for an upward revision to the FY25/26 remit but most of the analyst notes we have seen on this are non-specific in terms of the numbers. We have only seen three estimates with numbers on from the sell side: Lloyds and Citi look for around GBP10bln (although Lloyds looks for this to be in bills rather than gilts, while Citi looks for it in gilts). Deutsche Bank looks for GBP10-15bln with a point estimate of GBP12bln but run three scenarios which see risks range from GBP8.7-17.9bln; Deutsche sees the revision being in gilts but see "some meaningful risk" of a GBP2bln increase UKTBs.
• We think that the bar to increasing linker issuance is relatively high. Anything up to around GBP10.6bln could be achieved by increasing the number of short, medium and long conventional auctions by one (and maintaining the current average sizes). An increase of GBP8.5bln could be achieved without an extra long auction.
• We think there is also the potential to add more to UKTB issuance, too, as demand may well increase as reserves become more scarce as QT continues and the TFSME continues to wind down. The DMO may prefer to add a little to UKTB issuance rather than increase long-dated issuance.
• And the wildcard is there is also more flexibility in the unallocated bucket given programmatic gilt tenders.
• For reference last year's remit revision was GBP12.4bln (all in gilts, no UKTB change) comprised of:
  • GBP5.4bln of additional shorts with one extra auction
  • GBP3.9bln of additional mediums with one extra auction
  • GBP1.0bln of additional longs with one extra auction
  • GBP1.1bln of additional linkers with one extra auction
  • GBP1.0bln of additional unallocated

First earnings of the week filtering through in a busy few sessions for corporate reports. So far today:

• 3M - Beats on EPS
• General Electric - Beats on EPS, affirms FY view

Major names due this week including:

Tuesday: Tesla, Verizon, Lockheed Martin
Wednesday: Boeing, IBM, Philip Morris
Thursday: Alphabet, P&G, T-Mobile
Friday: Abbvie

Full schedule including EPS, revenue expectations and timings here: https://media.marketnews.com/MNIUSEARNINGS_210425_3ed710b2f3.pdf

Recent option flow includes:

• ERZ5 98.50/62 call spread vs. 98.31/18 put spread paper paid 0.5 for the put spread on 13K.
• ERM5 98.12/98.25 call spread paper paid 1.25 on 5K.