EGBS: Bunds Inside Yesterday's Range, Awaiting PMIs, CPI
- Bund traded flat through the cash open and the contract sticks close to the middle of yesterday's range as markets wait for the prelim PMIs and, more importantly, the US CPI print tomorrow. Our CPI preview found here, in which focus will be pre-shutdown inflationary pressures, albeit with persistent concerns over data quality: https://media.marketnews.com/USCPI_Prev_Oct2025_f7e5818f86.pdf
- Yesterday's Bund range was 129.94/130.38 (low/high), but these levels steered clear of any major technical levels.
- Support is unchanged at 129.76 (matched 2.60% on Monday), while the resistance will be eyed at the 2.50% low in yields (circa 130.73).
- There are no tier 1 data releases today, as weekly jobless claims will not be released due to the shutdown, however the National Association of Realtors should proceed with the existing home sales release.
SUPPLY: UK £4.75bn 2031 (Equates to ~25.5k Gilt) could weigh onto Gilt into the bidding Deadline. US Sells $26bn of 5yr TIPS.
SPEAKERS: ECB's Lane (set to receive an award), BoE's Dhingra.
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GILTS: Firmer On Wider Cues, Supply Provides Litmus Test For Long End Demand
Gilts a touch higher after Bunds & Tsys firm through early London trade.
- Ongoing weakness in crude oil helps provide support.
- Futures back towards yesterday’s high, topping out at 90.91.
- Initial support and resistance 90.60/91.11.
- Yields 1-2bp lower, curve flatter, last week’s lows in 2s10s and 5s30s remain untouched (closing lows are ~6bp away on both curves).
- UK flash PMI data is due today.
- It is also worth noting that the DMO will come to market with 30-Year gilts. Market participants will be watching the demand metrics closely after last week’s PSNB data revealed ongoing fiscal deterioration.
- On the fiscal front, the Resolution Foundation has suggested that Chancellor Reeves could raise ~GBP6bln by cutting employee national insurance contributions by 2ppt and raising the basic rate of income tax by the same amount. Note that this would only cover around 20% of the fiscal shortfall, but it would be a way of not increasing taxes on "working people" and might avoid some more painful taxes elsewhere that could hit growth harder or increase CPI.
- Elsewhere, BoE chief economist Pill will speak via a fireside chat on “Challenges of Monetary Policy in an Environment of High Fiscal and Geopolitical Uncertainty” (10:00 London).
AUDUSD TECHS: Corrective Cycle In Play
- RES 4: 0.6793 1.500 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 1: 0.6660/6707 High Sep 18 / 17
- PRICE: 0.6586 @ 08:07 BST Sep 23
- SUP 1: 0.6575/6547 Low Sep 22 / 50-day EMA
- SUP 2: 0.6527 61.8% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and the latest pullback is considered corrective - for now. The recent rally plus the breach of 0.6625, the Jul 24 high and bull trigger, confirms a resumption of the uptrend. The climb opens the 0.6726 next, a Fibonacci projection. MA studies are in a bull-mode position highlighting a dominant uptrend. Key support to watch is 0.6415, the Aug 21 / 22 low. Initial firm support to watch is 0.6547, the 50-day EMA.
RIKSBANK: Rate Decision At 0830BST A Very Close Call Between Cut and Hold
The Riksbank decision is due at 0830BST/0930CET, with consensus split between a 25bp cut to 1.75% and a hold at 2.00%.
- MNI Preview here
- There are credible reasons to motivate either decision.
- We suspect the Board will be equally split (but don’t necessarily think that will be reflected in any formal dissents), with some members advocating for a form of insurance cut given a still-weak labour market and signs that the recent inflation uptick was temporary, and others preferring to wait for more data before determining if another cut is necessary.
- The September decision includes an updated MPR and rate path projection.
