SWITZERLAND DATA: CPI Scheduled For Tomorrow 07:30 BST / 08:30 CEST
Oct-01 15:13
Swiss September CPI is scheduled for release tomorrow, October 2, 07:30 BST / 08:30 CEST, with consensus for a marginal acceleration in the headline Y/Y rate to 0.3% (0.2% August). Core CPI meanwhile is seen to remain unchanged at 0.7% Y/Y this time.
- A consensus reading would keep inflation within the SNB's defined target of price stability, and bring the average Q3 print to around 0.2%, in line with the SNB forecast for the quarter from last week. Market pricing remains for a mere 10bps of easing being priced through the June 2026 meeting, and it seems that substantial downside momentum in Swiss CPI would be needed to materially shift these expectations into a dovish direction. For a review of Thursday's SNB meeting, see here.
- Assuming such downside momentum unexpectedly should materialize at tomorrow's print, apart from headline inflation, focus should specifically be on domestic and services CPI, categories which the SNB historically seemed to look at when judging for underlying inflationary pressures. See chart / table below for recent figures.
- For tomorrow's release, UBS sees headline at "0.25% y/y, indicating upside risk to our rounded estimate of 0.2% y/y. At the component level, we expect our definition of core inflation (headline excluding energy and food) to edge up 0.1pp to 0.8% y/y largely due to a rebound in services related to transportation and package holidays, which were weaker than we anticipated in August. Outside of core, we expect energy inflation to rise 1.6pp to -6.1% y/y, while food inflation is expected to edge down 0.1pp to -0.6% y/y. Looking ahead, we forecast inflation to pick up in Q4 to an average of 0.4% y/y."
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GILTS: Steepening Intact Even With Yields Off Highs
Sep-01 14:48
Gilts have taken cues from wider core global FI markets for much of the day.
- Slightly softer-than-flash final manufacturing PMI data did little for the market, but probably meant that early London lows were not re-tested. Futures last -19 at 90.33.
- The contract breached initial support (90.22), basing at 90.20, but leaving key support at late May lows (90.11) untested.
- Bears remain in technical control.
- Yields are 1.0-2.5bp higher. Curve bear steepens.
- 5s30s is on track for its first close above 150bp in the current cycle. Next upside level is the Feb ’17 high (152.63bp).
- Little change in the very front end of the GBP STIR strip on the day, with SONIA futures +0.5 to -3.5, twist steepening. August lows untested.
- BoE-dated OIS is steady, showing ~9bp of cuts through year-end. We think the November meeting is much more “live” than the 4bp currently discounted by markets.
- Fiscal risks remain front and centre in the UK. Today’s headlines have focused on operational adjustments within the government, with source reports playing down the likelihood of an impending cabinet reshuffle.
- A reminder that the DMO will introduce the new 4.75% Oct-35 gilt via syndication this week. That could come as soon as tomorrow.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.973 | +0.5 |
Nov-25 | 3.925 | -4.2 |
Dec-25 | 3.874 | -9.3 |
Feb-26 | 3.777 | -19.1 |
Mar-26 | 3.739 | -22.9 |
Apr-26 | 3.672 | -29.5 |
SEK: Most notable move in EURSEK
Sep-01 13:50
- Today is the most notable single move in the EURSEK in a Month, since 1st August ~9 big figures range.
- For now the cross seems to be finding some support at the Psychological 11.0000 level.
- The early chart to watch was the USDSEK, now close to testing the 2025 low.
EGBS: Limited Benefit To Bunds From OAT Weakness
Sep-01 13:44
Goldman Sachs note that “although French assets have been under pressure, spillovers to the rest of Europe - and to EGBs in particular – have been contained. Ongoing declines in rates volatility help to contain risks to other sovereign spread markets. And there has been limited richening in Bunds vs. swaps compared to last year’s snap elections”.
- They provide two possible explanations:
- “Uncertainty in France has not reached the same level as last year, with parliamentary elections likely not yet widely expected and less speculation about President Macron resigning. In the same vein, markets may be drawing some comfort from having witnessed the relatively smooth transition from the Barnier to the Bayrou government last November”.
- “With the ECB cutting cycle now over, German fiscal easing underway, and a more challenging duration backdrop globally, the prospect of substantial Bund outperformance is dimmer”.
- Ultimately, Goldman continue to “expect Bunds to cheapen, both in outright terms and against swaps. That said, to the extent that we expect the cheapening in Bunds vs. swaps to be gradual, the increased tail risk in France and lack of reaction in swap spreads so far diminish the risk reward for tighteners, in our view”.
