BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Pre-UK CPI
Nov-18 20:10
Gilts underperformed across the European space Tuesday.
- Bunds and Gilts gained early in a safe haven bid with equities continuing to struggle, though headed off highs as stocks and energy prices stabilised.
- Core FI would recover from session lows in the early European afternoon on the back of a bounce in US Treasuries, after private sector payrolls data suggested recent labor market weakness as we await Thursday's employment report for September.
- Nothing in commentary by BOE's Pill suggested that he would vote for a December cut.
- The UK curve bear steepened on the day, while the German curve twist steepened.
- Periphery/semi-core EGB spreads widened slightly, though closed off the widest levels after equities stagaed a modest recovery into the cash close.
- UK inflation data will be the focus Wednesday - MNI's preview is here. With sellside expectations skewed towards a softer print, and markets pricing
in 18bp for the December meeting, we think that an upside surprise to the BOE's forecast would therefore likely cause a larger market move than a
downside surprise.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.3bps at 2.019%, 5-Yr is down 1.5bps at 2.293%, 10-Yr is down 0.6bps at 2.706%, and 30-Yr is up 0.9bps at 3.319%.
- UK: The 2-Yr yield is unchanged at 3.8%, 5-Yr is up 0.9bps at 3.973%, 10-Yr is up 1.9bps at 4.554%, and 30-Yr is up 3.6bps at 5.386%.
- Italian BTP spread up 1.5bps at 75.1bps / French OAT up 1.1bps at 75.5bps
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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.
