BONDS: EGBs-GILTS CASH CLOSE: Gilts Cap Strong Week With More Bull Flattening
Jan-09 17:35
Core European government bonds concluded a strong week with mixed performance, as Gilts easily outperformed Bunds.
- After a mixed start to trade, European yields resolved to the downside, but this was only after a short-term uptick in early afternoon.
- The latter was triggered by multiple factors, including a better-than-expected US unemployment rate, lack of a US Supreme Court decision on President Trump's tariffs, and weakness in JGBs after reports pointing to a potential dissolution of the Japanese lower house.
- In the end, Gilts resumed their gains more convincingly than German counterparts which saw little change on the day.
- In European data, industrial production was above-consensus in France, Germany, and Spain though this brought no market impact.
- Curves bull flattened for the week: UK 10Y yields fell over 16bp, with 2Y down 9bp; that was 4bp and 3bp for Germany at those tenors, respectively.
- Periphery / semi-core EGB spreads tightened slightly, mirroring gains in European equities.
- Potential ratings actions after the close include Fitch on Germany. Next week's calendar includes UK monthly activity data and the S&P Global-KPMG-REC Report on Jobs.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1.2bps at 2.107%, 5-Yr is up 0.8bps at 2.419%, 10-Yr is unchanged at 2.863%, and 30-Yr is down 0.6bps at 3.462%.
- UK: The 2-Yr yield is down 1.2bps at 3.644%, 5-Yr is down 1.8bps at 3.835%, 10-Yr is down 3bps at 4.374%, and 30-Yr is down 3.9bps at 5.12%.
- Italian BTP spread down 1.3bps at 63.3bps / Spanish bond spread down 0.5bps at 38.7bps
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US STOCKS: Midday Equities Roundup: DJIA Outperforming Ahead FOMC
Dec-10 17:18
- Stocks ae trading near steady (SPX eminis) to mixed Wednesday, the DJIA outperforming at midday as shorts unwound ahead of this afternoon's FOMC policy announcement at 1400ET - markets anticipating a third consecutive 25bp cut with a hawkish forward guidance.
- Currently, the DJIA trades up 212.65 points (0.45%) at 47767.54, S&P E-Mini Futures up 2.25 points (0.03%) at 6850.25, Nasdaq down 66.4 points (-0.3%) at 23509.99.
- A mix of Consumer Staples and Financials sector shares led declines in the first half: GE Vernova +14.02%, LKQ Corp +4.60%, Omnicom Group +4.26%, Seagate Technology Holdings +3.99%, Becton Dickinson +3.41%, Regeneron Pharmaceuticals +3.20% and Western Digital +3.17%.
- Note Warner Bros Discovery gained another +4.83% as the week's competitive takeover headlines between Paramount Skydance and Netflix provided further support.
- On the positive side, Consumer Discretionary, IT and Industrials led advances: Uber Technologies -5.22%, DoorDash -3.53%, Blackstone -3.15%, T Rowe Price Group -3.15%, TransDigm Group -3.01%, TKO Group Holdings -2.63% and Kroger -2.46%.
ENERGY: Record Canada Crude Production In First Half Of 2025
Dec-10 17:10
- Through June 2025 domestic oil production averaged 5.19 MMb/d vs 5.01 MMb/d in the same period last year according to the Canada Energy Regulator.
- Since 2020, Canadian crude oil and equivalents production has increased steadily, setting new records each year.
- Shipments aided by Trans Mountain pipeline expansion in May 2024.
- Prime Minister Mark Carney recently signed a deal with Alberta Premier Danielle Smith to fast-track any private investor willing to build a new pipeline to the west coast.
FOREX: USD Index Erases Weekly Advance as Fed Decision Looms
Dec-10 17:09
- The USD index has fallen 0.2% today, eroding the moderate advance seen across Monday/Tuesday to bring us back to unchanged levels on the week as we approach tonight FOMC decision. The committee is expected to look through the data fog and deliver a “hawkish cut”, with a third consecutive 25bp reduction in the Fed funds rate range to 3.50-3.75%.
- Forward guidance is likely to be amended to reflect a more patient stance on cuts. As such the market reaction to the meeting could hinge on how Chair Powell portrays the burden of proof for the next cut. Our preview is here: https://mni.marketnews.com/44lsJ9H
- G10 gains are being led by the Swiss Franc, which has been boosted alongside the Japanese yen and the reversal lower for US yields today. Additional contributing factors to the Swiss Franc outperformance were confirmation of US trade deal details filtering through and specific Roche headlines surrounding positive cancer drug data significantly boosting the Swiss Market Index.
- USDCHF has been broadly respecting an 0.80-0.81 range over the past four weeks, while EURCHF recently topped out just shy of the 0.9400 mark after matching the September highs.
- Despite the unchanged DXY this week, USDJPY remains around 0.7% higher this week amid the hawkish repricing across fixed income markets and regional geopolitical uncertainty weighing on the yen. These dynamics highlight the dominant medium-term uptrend in place for the pair, with the topside focus remaining on 157.89, the Nov 20 high and technical bull trigger.
