BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Ahead Of BOE
Nov-05 17:46
European yields rose Wednesday. with Gilts underperforming.
- Core EGBs and Gilts traded flat in the European morning, with some downward bias as Services PMIs were revised up from flash in the final for the UK, France and Germany (with Italy and Spain coming in above-expected) and anticipation grew of a nearer-term resolution to the US federal government shutdown.
- Yields rose through the afternoon led by US Treasuries, following stronger than expected US data (ISM Services, ADP private payrolls).
- In other data, the ECB's latest forward-looking wage tracker was revised up marginally, while German September factory orders were a little stronger than expected.
- On the day both the German and UK curves bear steepened, with Gilts underperforming ahead of Thursday's BOE decision announcement.
- Periphery/semi-core EGB spreads widened slightly.
- The BOE is Thursday's market focus. MNI's preview is here - we characterise our view as 50/50 (when it comes to a cut or a hold), which is comfortably more dovish than current market pricing.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 2.004%, 5-Yr is up 1.5bps at 2.27%, 10-Yr is up 1.9bps at 2.673%, and 30-Yr is up 2.2bps at 3.259%.
- UK: The 2-Yr yield is up 2bps at 3.804%, 5-Yr is up 3.1bps at 3.93%, 10-Yr is up 3.8bps at 4.463%, and 30-Yr is up 4.5bps at 5.249%.
- Italian BTP spread up 0.5bps at 75.1bps / French OAT up 0.3bps at 78.5bps
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US TSYS/OVERNIGHT REPO: ON RRP Takeup Dips, Remains Negligible
Oct-06 17:30
Overnight reverse repo takeup fell $3.6B Monday to $21.8B.
- That's up from the multi-year low $8.4B posted Thursday after quarter/month-end takeup reversed, but overall takeup effectively remains negligible.
- ON RRP + reserves were under $3T as of last Wednesday, potentially getting nearer to the Fed's "ample" threshold of reserves from the current "abundant" regime.
GBPUSD TECHS: Trading Below Resistance
Oct-06 17:30
- RES 4: 1.3789 High Jul 1 and key resistance
- RES 3: 1.3726 High Sep 17
- RES 2: 1.3661 High Sep 18
- RES 1: 1.3537 High Sep 23 and a pivot level
- PRICE: 1.3476 @ 16:27 BST Oct 6
- SUP 1: 1.3324 Low Sep 25 and the bear trigger
- SUP 2: 1.3282 Low Aug 6
- SUP 3: 1.3254 Low Aug 4
- SUP 4: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
A bear cycle in GBPUSD that began Sep 17 is intact, for now. Initial key resistance to watch is unchanged at 1.3537, the Sep 23 high and a near-term pivot level. Clearance of this hurdle would signal a potential reversal. Recent weakness resulted in a break of a trendline drawn from the Aug 1 low. Note too that 1.3333, the Sep 3 low and a key support, has been pierced. A resumption of weakness would open 1.3282 next, the Aug 6 low.
US: White House Press Conference Underway Shortly
Oct-06 17:01
White House Press Secretary Karoline Leavitt is shortly due to brief reporters at the White House. LIVESTREAM
- Comes as Senate Majority Leader John Thune (R-SD) prepared to hold a fifth vote this evening on the House-passed Continuing Resolution to fund the government through November 21. The bill is expected to fail again, and Thune has shown no sign of changing tack on his strategy to keep re-running the vote until Democrat Senators fold amid a pressure campaign led by White House Office of Management and Budget Director Russell Vought.
- Canadian Prime Minister Mark Carney will travel to Washington, DC, today ahead of a meeting with President Trump tomorrow. Expectations are low for any major trade breakthroughs.
- House Speaker Mike Johnson (R-LA) and National Economic Council Director Kevin Hassett both signalled in interviews on Sunday that federal worker layoffs are coming. Johnson said layoffs would be “a regrettable situation that the president does not want,” while Hassett said layoffs would start “if the president decides that the negotiations are absolutely going nowhere.”
- Trump-appointed US District Judge Karin Immergut yesterday blocked Trump’s latest attempt to deploy National Guard troops to Democrat-run cities. The ruling is the second blow in two days to Trump’s bid to send National Guard troops into Portland, Oregon.
- The Wall Street Journal notes, “Trump plans to federalize 300 members of the Illinois National Guard despite the objection of Gov. JB Pritzker [D-IL].”
