BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform As BOE Out-Hawks ECB
EGB yields fell but Gilt yields rose in a busy session Thursday.
- The first major flashpoint of the day was the BOE, which despite delivering the fully-priced 25bp cut triggered a Gilt sell-off led by the front-end amid an expression of a "closer call" on future cuts as well as lack of dovish surprise in the vote split (5-4 as expected).
- While EGBs saw some modest weakness post-BOE compared to Gilts, they would see a notable rise in yields to session highs on the ECB decision which included higher-than-expected growth forecasts. (MNI's review of the ECB meeting is here.)
- However, yields would ultimately pare back from the highs, with ECB's Lagarde noting that rate hike talk was premature, and US CPI showed softer-than-anticipated price pressures (albeit in a messy, delayed report).
- The UK curve twist flattened, with Germany's bull flattening. Periphery/semi-core EGB spreads closed tighter, narrowing alongside equity gains in the European afternoon.
- Friday's schedule includes UK public finances and retail sales data as well as various eurozone confidence surveys, along with a slew of ECB speakers (at least 9 on the docket including Chief Econ Lane).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is unchanged at 2.137%, 5-Yr is down 1.6bps at 2.45%, 10-Yr is down 1.4bps at 2.85%, and 30-Yr is unchanged at 3.485%.
- UK: The 2-Yr yield is up 3.7bps at 3.745%, 5-Yr is up 2.4bps at 3.937%, 10-Yr is up 0.6bps at 4.481%, and 30-Yr is down 1.5bps at 5.208%.
- Italian BTP spread down 1.6bps at 68.9bps / French OAT down 0.4bps at 70.6bps
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PIPELINE: Corporate Bond Roundup: Guidance Updated for Pfizer 7Pt Jumbo
Historical context for Pfizer issuance: the multinational pharmaceutical and biotechnology corporation is the eighth largest issuer on record with $31B over 8 tranches on May 16, 2023: $3B 2Y +60, $3B 3Y +75, $4B 5Y +95, $3B 7Y +115, $5B 10Y +125, $3B 20Y +130, $6B 30Y +145, $4B 40Y +160. Rate locks from hedgers and speculative accts certainly weighing on Treasuries today.
- Date $MM Issuer (Priced *, Launch #)
- 11/18 $Benchmark Pfizer 7pt jumbo: 2Y +30, 2Y SOFR, 5Y +52, 7Y +65, 10Y +75, 30Y +87.5, 40Y +100.
- 11/18 $2.5B Genmab 7NC3 6.375%a, 8NC3 7.375%a
- 11/18 $750M #Vale Overseas +30NC5 6.125%
- 11/18 $600M Eurofima Jan 2029 SOFR+36
- 11/18 $600M #Buenos Aires 7Y 8.125%
- 11/18 $500M #Global Atlantic Fin 30NC5 7.25%
- 11/18 $Benchmark Sharjah 10.5Y Sukuk +145a
- 11/18 $Benchmark RGA Global Funding 5Y +93a
- 11/18 $Benchmark Pricoa Global Funding 5Y +68
- 11/18 $Benchmark Steel Dynamics 3Y +63, 10Y +93
- 11/18 $Benchmark Cenovius +5Y +100a, +10Y +130a
- 11/18 $Benchmark Protective Life Corp +5Y +105, 10Y +125
- 11/18 $Benchmark Protective Life Corp +5Y +105a, 10Y +125a
- 11/18 $Benchmark Spire 30.5NC5.25 6.25%, 30.5NC10.25 6.45%a
- 11/18 $Benchmark Goldman Sachs Private Equity investor calls
FED: Trump Says Being Stopped From Firing Powell, Could Surprise With New Chair
US President Trump when asked on Fed Chair deliberations heading towards the new year in press questions at a bilateral meeting with the Crown Prince of Saudi Arabia.
- Reporter: Have you started the interviews for the Fed Chair?
- Trump: Yes
- Reporter: Who have you already interviewed?
- Trump: I think I already know my choice. I liked him [pointing to US Tsy Sec Bessent] but he’s not going to take the job. He refused. You like Treasury better, right?
- Bessent: Much better sir.
- Trump: So we are talking to various people. Frankly, I’d love to get the guy currently in there out right now, but people are holding me back. He's done a terrible job, hurting housing a little bit. The truth is, we've been so successful, we've blown past his interest rate stupidity. […] He's a fool. He's a stupid man. But we have some very good people.
- Bessent: You’ll be sitting down with them in the near future.
- Trump: We have some surprising names that we have, we have some standard names that everybody is talking about. We may go the standard way. You know, it’s nice to every once in a while go, uh, politically correct. But we have some great names.
EURUSD TECHS: MA Studies Highlight A Dominant Downtrend
- RES 4: 1.1728 High Oct 17
- RES 3: 1.1694 50.0% retracement of the Sep 17 - Nov 5 bear leg
- RES 2: 1.1669 High Oct 28 and key resistance
- RES 1: 1.1656 High Nov 13
- PRICE: 1.1578 @ 16:36 GMT Nov 18
- SUP 1: 1.1530/1469 Low Nov 7 / 5 and the bear trigger
- SUP 2: 1.1425 1.500 proj of the Oct 17 - 22 - 28 price swing
- SUP 3: 1.1392 Low Aug 1 and bear trigger
- SUP 4: 1.1313 Low May 30
Resistance to watch in EURUSD remains 1.1669, the Oct 28 high. Clearance of this hurdle is required to strengthen a short-term bull theme and highlight a stronger reversal. Note that moving average studies are in a bear-mode position. This highlights a dominant downtrend and continues to suggest that gains since Nov 5 are corrective. A reversal lower would refocus attention on key support at 1.1469, the Nov 5 low.
