GILTS: Bullish Momentum Stalling
Feb-12 10:30
Supply-related pressure across wider core global FI markets and spillover from a rally in European equities weighed on gilts at the open, with fresh selling seen in recent trade.
- A downtick in oil has limited the weakness.
- Futures as low as 92.80.
- First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
- Yields 1.5-2.5bp higher across the curve.
- 10-Year spread to Bunds little changed at ~207.5bp.
- Local headline flow has been dominated by NIESR’s higher-for-longer view surrounding the BoE (looking for one cut in both ’25 and ’26, leaving Bank rate at 4.00%) and suggestions surrounding the erosion of the UK’s narrow fiscal headroom (not a new idea)
- GBP1bln of 0.625% 0.625 Mar-45 I/L supply was digested smoothly.
- Modest hawkish adjustments in GBP STIRs seen given the moves in the long end.
- 58.5bp of BoE cuts priced through year-end vs. 60bp early today.
- SONIA futures flat to -2.0.
- Comments from BoE MPC member Greene due this afternoon (15:00 GMT).
- Spill over from U.S. CPI data also eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.407 | -4.7 |
May-25 | 4.211 | -24.3 |
Jun-25 | 4.134 | -32.0 |
Aug-25 | 3.989 | -46.5 |
Sep-25 | 3.953 | -50.1 |
Nov-25 | 3.883 | -57.2 |
Dec-25 | 3.869 | -58.5 |
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EGBS: Under Pressure, Spreads Wider
Jan-13 10:30
Core global FI markets remain under pressure.
- Bearish technicals and rallying energy prices weigh early this week.
- Bund futures as low as 130.57 before a recovery to 130.70.
- German yields 2-3bp higher, 5s lead the move.
- 10s near their July high (2.642%), that level equates to 130.50 in futures today.
- Weakness in core global FI & European equities promotes EGB spread widening
- BTP/Bunds ~5bp wider at 122.5bp, eying the early December closing high (123.3bp). 3- & 7-Year BTP supply passed smoothly.
- OATs ~2bp wider vs. Bunds, 85bp caps for now. ’24 cycle closing highs at 88.4bp lie above. Participants eye French PM Bayrou’s inaugural speech to parliament, due Tuesday.
- GGBs widen by ~4.5p vs. Bunds, unwinding some of their early ’25 outperformance.
- No real sign of underperformance for 10-Year RAGBs this morning, despite the negative ratings outlook move from Fitch on Friday as Austrian fiscal & political headwinds are well-documented. Spread to Bunds +1bp.
- Little of note in ECB speak from Lane, Rehn & Vujcic. Vujcic seemingly remains more cautious when it comes to cuts, while Lane & Rehn stuck to the central ECB view.
- ECB-dated OIS price 88bp of cuts through year-end vs. ~92bp late Friday.
- Cross-market cues eyed for the remainder of the day, with little of note on the European calendar.
EQUITIES: US and EU Option expiry Friday
Jan-13 10:20
Equity Option expiry Friday in Notional term:
- SPX: $1.72T.
- NDX: $75.34bn.
- Amazon: $24.58bn.
- Apple: $52.76bn.
- SX5E: €104.23bn.
- SX7E: €3.65bn.
- Dax: €15.78bn.
- CAC: €1.75bn.
- FTSE: £10.41bn.
ITALY AUCTION RESULTS: 3/7-year BTPs
Jan-13 10:13
| 2.70% Oct-27 BTP | 3.15% Nov-31 BTP | |
| ISIN | IT0005622128 | IT0005619546 |
| Amount | E2.75bln | E3bln |
| Previous | E3bln | E3bln |
| Avg yield | 2.85% | 3.49% |
| Previous | 2.35% | 2.92% |
| Bid-to-cover | 1.65x | 1.63x |
| Previous | 1.66x | 1.58x |
| Avg Price | 99.67 | 98.10 |
| Pre-auction mid | 99.641 | 98.016 |
| Prev avg price | 100.98 | 101.54 |
| Prev mid-price | 100.937 | 101.524 |
| Previous date | 12-Dec-24 | 12-Dec-24 |
