BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform On Renewed Fiscal Uncertainty
Nov-14 17:36
Gilts sold off sharply Friday on renewed UK fiscal concerns.
- Overnight reports that the Labour government would not raise income tax rates in the upcoming budget saw a sharp bear-steepening selloff in the UK curve, pushing yields to month-to-date highs across the curve in the biggest overall daily move since July.
- The selloff abated after reports/speculation that this apparent U-turn was facilitated by improved OBR forecasts rather than an outright politically-motivated capitulation, but the damage was done.
- EGB yields rose in sympathy, though not nearly to the same degree, with the German curve only bear steepening slightly.
- Periphery spreads widened alongside a risk-off move in equities but closed off their wides as stocks staged a late bounce; BTPs underperformed on the day.
- For the week, there was bear steepening in both the UK (2Y yield +4.8bp, 10Y +10.8bp) and German (2Y +4.6bp, 10Y +5.4bp) curves.
- After hours, Fitch's sovereign review of Greece is anticipated (an upgrade to BBB from BBB- would not be entirely surprising).
- Next week's scheduled highlights are flash November PMIs and UK October CPI.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.8bps at 2.036%, 5-Yr is up 1.9bps at 2.312%, 10-Yr is up 3.2bps at 2.72%, and 30-Yr is up 3.9bps at 3.319%.
- UK: The 2-Yr yield is up 8.2bps at 3.846%, 5-Yr is up 11bps at 4.011%, 10-Yr is up 13.7bps at 4.574%, and 30-Yr is up 16.4bps at 5.395%.
- Italian BTP spread up 2.2bps at 75.3bps / French OAT up 0.7bps at 73.8bps
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Historical bullets
GBPUSD TECHS: Bear Threat Still Present
Oct-15 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: 1.3422/3527 20-day EMA / High Oct 1 and a pivot level
- PRICE: 1.3356 @ 15:43 BST Oct 15
- SUP 1: 1.3249 Low Oct 14
- SUP 2: 1.3220 0.764 proj of the Sep 17 - 25 - Oct 1 price swing
- SUP 3: 1.3142 Low Aug 1 and a key support
- SUP 4: 1.3041 Low Apr 14
A short-term bear condition in GBPUSD remains intact. Recent weakness has resulted in the break of a key short-term support at 1.3333, the Sep 3 low. This signals scope for a deeper retracement. Attention is on 1.3280, a Fibonacci retracement. It has been pierced, a clear break of it would open key support at 1.3142, the Aug 1 low. Initial resistance to watch is unchanged at 1.3422, the 20-day EMA.
US: Americans "Resoundingly" Support Trump's Gaza Peace Plan
Oct-15 17:29
A new report from I&I/TIPP has found that US voters “resoundingly” support President Donald Trump’s peace plan for Gaza. TIPP notes, “59% said they would either support the deal “strongly” (30%) or “somewhat” (29%), while just 18% opposed the deal either “strongly” (9%) or “somewhat”. A large 23% of Americans said they were not sure.”
- “There were differences in support when it came to political affiliations, but all of the parties — Democratic Party (46% support, 30% oppose), Republican (78% support, 9% oppose) or independent (53% support, 18% oppose) — showed either a majority or plurality of support,” adds TIPP.
- The peace plan is facing its first significant test, with Israel accusing Hamas of refusing to adhere to the agreed-upon time frame for returning the remains of deceased hostages. In response, Israel has slowed the supply of aid into Gaza.
- When asked by reporters yesterday “how long will it take Hamas to disarm? And can you guarantee that is going to happen?” Trump replied: “If they don't disarm, we will disarm them and it will happen quickly and perhaps violently, but they will disarm.”
- Semafor notes, “Hamas, which returned more bodies after Israel’s threat, will “play along” with the ceasefire, an expert on the group wrote in Foreign Affairs. But it “will fight tooth and nail to preserve its political and military standing in Gaza.””
Figure 1: “Do you support or oppose the Trump peace plan for Gaza?”
Source: TippInsights
US TSYS: Climbing Off Session Lows
Oct-15 17:17
- Treasuries are climbing off recent session lows following comments by Fed Gov Miran (voter) at a at Nomura Research Forum stated that US-China trade tensions tied to rare-earth curbs "pose significant downside risks". Ironically, this comes after after Treasury Sec Bessent suggested the possibility of a "longer tariff truce with China tied to rare-earth imports" helped risk sentiment earlier.
- Currently, Tsy Dec'25 10Y contract trades 113-09.5 (-3.5) vs. 113-07 low, yld tapped 4.0417% high; curves flatter/off lows: 2s10s -1.874 at 53.061, 5s30s -1.692 at 10.603.
- Initial technical support at 112-26 (20-day EMA) followed by the 50-day EMA at 112-16. A clear break of the average would expose 111-13+, the Aug 18 low and a key support.
- Cross asset: Bbg US$ index off lows, -2.77 at 1211.67, stocks claw extending lows: DJIA down 196.59 points (-0.42%) at 46030.72, S&P E-Minis down 27.25 points (-0.41%) at 6653.25, Nasdaq down 69.1 points (-0.3%) at 22429.75.
