BONDS: EGBs-GILTS CASH CLOSE: Bear Steeper As BOE Delivers Expected Hold
European curves bear steepened Thursday.
- Early trade saw limited moves in EGBs and Gilts, with little net impact from the Federal Reserve decision the previous day after the cash close.
- The BOE decision (7-2 vote for a hold) was fully as expected, though there was a bit of twist steepening subsequently seen in the UK curve as the front-end faded a pre-meeting buildup of hawkish positioning.
- Stronger-than-expected US jobless claims data saw a sell-off in Treasuries spill over into Europe.
- In an interview later in the session, BOE's Bailey pointed to ongoing expectations for further rate cuts, while assuaging fears over the impact of QT, helping limit Gilt losses going into the close.
- ECB Vice President de Guindos told an MNI Connect event that the risk of persistent inflation undershooting is not that big.
- The German and UK curves both bear steepened on the day, with little difference in performance. Periphery / semi-core EGB spreads were little changed.
- Friday concludes a busy week for the UK with retail sales and public sector finance data, while we also get French confidence data.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 2.011%, 5-Yr is up 2.7bps at 2.306%, 10-Yr is up 5.1bps at 2.726%, and 30-Yr is up 7.9bps at 3.309%.
- UK: The 2-Yr yield is up 0.2bps at 3.961%, 5-Yr is up 2.9bps at 4.103%, 10-Yr is up 5.1bps at 4.676%, and 30-Yr is up 7.7bps at 5.507%.
- Italian BTP spread up 0.7bps at 79.7bps / French OAT up 0.2bps at 80.8bps
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US: White House Press Conference Underway Shortly
White House Press Secretary Karoline Leavitt is shortly due to brief reporters at the White House. LIVESTREAM According to his official schedule, President Donald Trump is shortly due to sign the "Maintaining American Superiority by Improving Export Control Transparency Act."
- According to the bill text, the Department of Commerce's Bureau of Industry and Security (BIS) will be required to "annually report to Congress on export control licensing."
- The legislation notes: "Under current law, BIS administers and enforces controls on the export of dual-use goods (e.g., items with both civilian and military uses) and certain military parts and components... Under this bill, BIS must annually report to Congress on license applications, enforcement actions, and other requests for authorization for the export, reexport, release, and in-country transfer of items subject to the EAR to covered entities."
EURUSD TECHS: Bullish Outlook
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1730 High Aug 13
- PRICE: 1.1670 @ 15:54 BST Aug 19
- SUP 1: 1.1586 50-day EMA
- SUP 2: 1.1392 Low Aug 1 and bear trigger
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
EURUSD continues to trade within range of the latest highs and the short-term bullish outlook is intact. Moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. A continuation higher would expose key resistance and the bull trigger at 1.1829, the Jul 1 high. Clearance of this level would resume the uptrend. Support to watch lies at 1.1586, the 50-day EMA. Major support rests at 1.1392, the Aug 1 low.
STIR FUTURES: BLOCK: Red Dec'26 SOFR Buy
- +10,000 SFRZ6 96.88, post time offer at 1250:50ET.
- The Red Dec'26 contract trades 96.88 last (+0.015)
