GILTS: Curve Bear Steepens
Gilts hold most of the early losses that stemmed from the Court of International Trade’s judgement blocking a significant portion of the U.S. tariffs (detailed in earlier bullets).
- The Trump administration has already appealed the judgement and there are several channels that Trump could use to levy further tariffs in the interim.
- Futures breached yesterday’s low, basing at 90.69, before a recovery back to ~90.80 at typing.
- Initial support lies at the May 23 low (90.46). Bears remain in technical control.
- Yields are 1-3bp higher, with the curve steeper.
- 10s haven’t challenged resistance at 4.800/809%.
- 2s10s and 5s30s haven’t threatened cycle closing highs.
- 10s vs. Bunds little changed at 217bp, April closing highs remain intact in the spread.
- 0.125% Aug-31 I/L supply was smoothly digested.
- SONIA futures little changed to -2.5.
- BoE-dated OIS still showing ~34bp of cuts, in line with levels seen ahead of the gilt open.
- BoE Governor Bailey will speak after the close (20:00 London).
- Little else of note on the UK calendar before then. That should leave focus on macro matters (namely U.S. data and any Trump comments/action following the previously covered tariff judgement).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.218 | +0.7 |
Aug-25 | 4.109 | -10.2 |
Sep-25 | 4.064 | -14.7 |
Nov-25 | 3.926 | -28.5 |
Dec-25 | 3.867 | -34.4 |
Feb-26 | 3.774 | -43.7 |
Mar-26 | 3.764 | -44.7 |
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FOREX: FX OPTION EXPIRY
Of note:
USDCAD 3.12bn at 1.3800/1.3835.
EURUSD 2.55bn at 1.1375/1.1395 (wed).
USDJPY 1.77bn at 142.00 (wed).
- EURUSD: 1.1325 (792mln), 1.1350 (282mln), 1.1440 (200mln).
- USDCAD: 1.3800 (489mln), 1.3805 (420mln), 1.3810 (770mln), 1.3820 (450mln), 1.3825 (667mln), 1.3835 (323mln).
- USDCNY: 7.3000 (674mln).
EGBS: Bund Futures Biased Slightly Higher But Key Resistance Remains Intact
Bund futures are +5 ticks at 131.32, with a downtick in oil prices and soft regional growth signals offset by a rise in spot/expected inflationary pressures. Kremlin suggestions that a 30-day truce with Ukraine is “impossible without solving all issues” provided only fleeting risk off flows into EGBs.
- Topside attention in Bund futures remains on 132.03, the Apr 7 high and bull trigger. Meanwhile the 20-day EMA at 130.70 provides support. German yields are 2-3bps lower across the curve.
- Spanish HICP inflation was 2.2% Y/Y (vs 2.0% cons, 2.2% prior), while 1/3-year ECB consumer inflation expectations also came in above consensus. However, this was offset by a weaker-than-expected Spanish Q1 GDP reading and a soft EC Economic Sentiment survey.
- Private sector lending growth continued its steady acceleration in March, rising two tenths to 2.6% Y/Y or three tenths to 2.0% Y/Y when adjusting for sales & securitisations (highest since Jun 2023).
- On the supply front, Finland and France are holding syndications while Italy has held a 5/10-year BTP and CCTeu auction.
- ECB’s Cipollone struck a characteristically dovish tone, warning of the downside growth risks related to US tariffs.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels. Following yesterday’s national outages, Spain and Portugal’s power systems are now back to normal.
- Tomorrow’s regional data calendar is equally heavy, with flash Q1 GDP and April inflation data due from Germany, France and Italy.
GILTS: Light Rally As Oil Softens
Gilt futures continue to oscillate within yesterday’s range, yields 1.5-2.5bp lower, light curve steepening. Moves aided by lower oil prices.
- Futures last ~93.20. Initial support and resistance located at 92.20/93.34, recent bullish technical theme remains intact.
- BoE-dated OIS little across contracts covering ’25 meetings.
- ~90bp of cuts still priced through year-end, a little less dovish than April’s extreme of ~97bp.
- The next 25bp cut is still fully discounted come the end of the May MPC.
- SONIA futures 0.5-2.0 higher, contracts remain below April highs.
- BoE Deputy Governor Ramsden will speak shortly (10:40 BST), although he seems unlikely to comment on monetary policy matters as he will give the keynote speech on payments innovation at the Innovate Finance Global Summit.
- That should leave macro cues at the fore, with continued focus on tariffs and the global trade backdrop. U.S. data, in the form of JOLTS and consumer confidence, is also eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.205 | -25.4 |
Jun-25 | 4.070 | -39.0 |
Aug-25 | 3.864 | -59.6 |
Sep-25 | 3.750 | -70.9 |
Nov-25 | 3.606 | -85.3 |
Dec-25 | 3.555 | -90.4 |
