GILTS: Bull Flattening Extends After I/L Auction
Sep-04 09:35
Strong demand at this morning’s I/L supply has allowed the bull flattening move in gilts to extend.
- A broader extension of yesterday’s rally in core global FI and another downtick in oil provided support in early London trade.
- Futures have traded to fresh session highs (90.62) following the auction.
- First resistance is located at the high from 28 & 29 August (90.84). Bulls need to force a break there to start turning the technical tide a little more in their favour.
- Bears still dominate at this stage, initial support at yesterday’s low (89.36).
- Yields are 1-5bp lower.
- 10-Year yields are ~20bp back from yesterday’s cycle high, while 30-Year yields are ~19bp off yesterday’s multi-decade top.
- 2s10s and 5s30s remain in their steepening trends despite the pullback from cycle highs.
- Modest dovish moves in GBP STIRs, with less than 10bp of easing still priced through year-end, SONIA futures little changed to +2.5.
- The latest BoE DMP survey pointed to a softening employment picture (which will probably embolden doves given their focus areas), meanwhile, it confirmed the impact of NIC & NLW hikes on inflation (which are knowns at this stage).
- Little of note on the UK calendar for the remainder of the day, which will leave cross-market cues and news flow front & centre.
- On the latter, fiscal worry still dominates in the UK.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.974 | +0.7 |
Nov-25 | 3.926 | -4.1 |
Dec-25 | 3.871 | -9.6 |
Feb-26 | 3.773 | -19.4 |
Mar-26 | 3.733 | -23.4 |
Apr-26 | 3.663 | -30.4 |
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GERMAN AUCTION RESULTS: 1.90% Sep-27 Schatz
Aug-05 09:32
| 1.90% Sep-27 Schatz | Previous | |
| ISIN | DE000BU22106 | |
| Total sold | E5bln | E5bln |
| Allotted | E3.916bln | E3.899bln |
| Avg yield | 1.90% | 1.87% |
| Bid-to-offer | 1.97x | 1.81x |
| Bid-to-cover | 2.51x | 2.33x |
| Avg Price | 99.995 | 100.064 |
| Low Price | 99.995 | 100.060 |
| Pre-auction mid | 99.983 | |
| Previous date | 15-Jul-25 |
GILTS: Basis Trade
Aug-05 09:29
Gilt Basis trade:
- G U5 ~1.46k at 92.54.
BONDS: 10-year Gilt/Bund Spread Tightens Post Auction
Aug-05 09:25
Solid demand at today’s 10-year Gilt auction helps the Gilt/Bund spread fully unwind early widening. The spread is now 0.5bps tighter on the session at 188bps, after reaching a high of 190bps ahead of the Gilt supply.
- 10-year Gilt yields are currently 4.51%, eyeing another test of the 4.50% level which provided support earlier this morning. The UK curve is lightly twist flatter, with 2-year yields up 0.5bps.
- German yields are up to 1bp higher across the curve, ahead of E5bln 1.90% Sep-27 Schatz supply at 1030BST.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels. Austria sold 8/10-year RAGBs this morning.
- Gilt and Bund futures are up to 5 ticks above yesterday’s settlement levels, still holding onto most of Friday’s US labour market report-inspired rally. A bullish theme is currently intact in both contracts.
- Today’s regional data calendar has been heavy, but not very market moving. Industrial production was stronger-than-expected in France and Spain, while the Eurozone final July services/composite PMIs saw marginal downward revisions. Eurozone June PPI was 0.8% M/M (vs 0.9% cons, -0.6% prior).
- The UK final July services PMI was revised up to 51.8 (vs 51.2 flash), but labour market details remain weak.
- Broader focus remains on Thursday’s BOE decision. MNI preview here.
