BONDS: EGBs-GILTS CASH CLOSE: Gilts Regain Some Ground Vs Steady Bunds
Nov-17 18:44
Gilts handily outperformed Bunds Monday, following last week's fiscal-related underperformance.
- After significant bear steepening late last week on UK Chancellor Reeves's reported decision not to raise income tax rates, Gilts initially maintained their weakness relative to Bunds on Monday with little in the way of fresh drivers.
- However Gilts would regain some ground through the cash close, tracking gains in US Treasuries, with Bunds conversely failing to benefit, trading in a relatively narrow range throughout the session.
- That allowed Gilts to outperform on the day though the overall underperformance since last Thursday remains intact (10Y spread/Bund still 7bp wider).
- Periphery/semi-core EGB spreads closed mixed. Greek spreads fell 1.5bp following Friday's not-entirely-unexpected upgrade to BBB from Fitch, though BTPs outperformed overall; OAT spreads closed a little wider.
- Tuesday's calendar includes no tier-one European data, though there will be commentary by ECB's Dolenc and Pereira, and BOE's Pill and Dhingra; the focus of the week is Wednesday's UK CPI release.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.6bps at 2.042%, 5-Yr is down 0.4bps at 2.308%, 10-Yr is down 0.8bps at 2.712%, and 30-Yr is down 0.9bps at 3.31%.
- UK: The 2-Yr yield is down 4.6bps at 3.8%, 5-Yr is down 4.7bps at 3.964%, 10-Yr is down 3.9bps at 4.535%, and 30-Yr is down 4.5bps at 5.35%.
- Italian BTP spread down 1.7bps at 73.6bps / Greek down 1.5bps at 61.8bps
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
Oct-17 20:51
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
Oct-17 20:30
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Oct-17 20:28
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
