GILTS: Bull Flattening Extends, Outperformance Vs. Bunds After PMIs
Nov-21 10:38
Soft UK services PMI data, a deterioration in wider risk sentiment and lower oil prices have driven a rally in gilts this morning.
- Futures trade as high as 92.43, piercing the first couple of layers of resistance.
- Bulls now look to the November 18 high (92.60) and the 20-day EMA (92.74), with a break above the latter needed to cancel the recent bearish move.
- Yields 4-7bp lower, with the curve flattening accelerating after the move higher in 2s10s stalled at 80bp earlier this week.
- The soft PMIs drove outperformance vs. Bunds, with the 10-Year spread moving to 185bp after a failure above 190bp in recent sessions.
- Elsewhere, retail sales & PSNB data was disappointing, but had little impact at the open.
- BoE-dated OIS 0.5-3.0bp more dovish on the day, showing nearly 22bp of easing for December, 29.5bp through February, 38.5bp for March and 48.5bp through April.
- SONIA futures flat to +5.5. Implied terminal rate at ~3.35%.
- Comments from BoE’s Pill are due later (15:40 London). Don’t expect much market movement as he already spoke earlier in the week. He has already noted that he doesn’t think that his view (he voted for no change in rates) has shifted much since this month’s meeting.
- A reminder that we do not expect much market vol. to stem from any non-Bailey BoE comments in the lead up to the December decision, given the entrenched views of the other MPC members (Bailey is deemed the key swing voter).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.752 | -21.7 |
Feb-26 | 3.674 | -29.5 |
Mar-26 | 3.585 | -38.5 |
Apr-26 | 3.484 | -48.5 |
Jun-26 | 3.438 | -53.2 |
Jul-26 | 3.379 | -59.0 |
Sep-26 | 1.000 | -296.9 |
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OUTLOOK: Price Signal Summary - Pullback In Gold Appears Corrective
Oct-22 10:34
- On the commodity front, a sharp pullback in Gold yesterday appears corrective - for now. Note that the trend is overbought and a deeper retracement would allow this condition to unwind. Support at the 20-day EMA, at $4031.4, has been pierced. A clear breach of the average would signal scope for a deeper retracement, potentially towards the 50-day EMA, at $3796.7. Key resistance and the bull trigger has been defined at $4381.5, the Oct 20 high.
- A bearish theme in WTI futures remains intact and the move down last week reinforces current conditions. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend. Sights are on $54.89 next, the May 5 low, where a break would open $54.10, the Apr 9 low and a key support. Initial firm resistance is seen at $61.76, the 50-day EMA. Short-term gains are considered corrective.
STIR: Back-to-Back Fed 25bp Cuts Still Eyed, Only Mild Impact From Soft UK CPI
Oct-22 10:27
- Fed Funds implied rates are little changed overnight, with back-to-back cuts seen for next week and December meetings before a quarterly pace thereafter to mid-2026.
- Cumulative cuts from 4.11% effective: 25bp Oct, 49.5bp Dec, 64.5bp Jan, 78bp Mar, 85.5bp Apr and 100.5bp Jun.
- SOFR futures are little changed on the day, with only small intraday spillover from a sizeable rally in UK rates on softer than expected UK CPI inflation.
- The SOFR implied terminal yield of 2.915% (SFRH7) is unchanged on the day, close to last week’s lowest close of 2.89% in risk-off moves on regional bank fears. For context, cycle lows were 2.77% back in Sep 2024 in anticipation of an aggressive start to the Fed’s easing cycle at the time.
- It’s a particularly thin data docket today, with just MBA mortgage applications. More notable releases for the week are state-level jobless claims to be released from Thursday afternoon and then the highlight being the delayed September CPI report on Friday.
