EU CREDIT SUPPLY: EUR/GBP Primary Recap (Provisional BBG Data)

The hawkish data reaction in U.S. markets triggers fresh selling in gilts.

• Futures as low as 91.46, Fibonacci support at 91.58 breached. Contract 91.55 last, -40 on the day.
• 10-Year yields register fresh session highs of 4.672%, hitting the highest level seen since ’23.
• 4.70% equivalent in futures located at 91.13 today, perhaps the next meaningful target for gilt bears.
• 30s to fresh multi-decade highs of 5.232%, eying next yield resistance at 5.250/255%.
• 10-Year gilt/Bunds now ~3.3bp wider on the day at 319.5bp.
• Gilt bears will look to force a move back above 220bp in that spread before setting their sights towards cycle highs.
• Note that our latest positioning indicator, released earlier today, points to continued long positioning in futures, albeit less extreme than the very long positioning witnessed in late July/early August.
• This positioning could further intensify sell offs, if longs are forced to exit.

• Following a consolidatory period ahead of the data, the greenback has firmed on the back of the US data, where JOLTS job openings have beaten consensus. Additionally, ISM services index rose above expectations and the price paid figure rose to 64.4, significantly ahead of the 57.5 estimate.
• US 10 year yields are rising to levels just below 4.7%, approaching the 2024 highs and accordingly USDJPY has seen a solid 50pip rally post the data. We are now approaching the overnight highs of 158.42, as markets become wary of spot re-entering the potential intervention zone. We noted finance minister comments overnight as helping to curtail the pressure on the yen.
• EURUSD is close to pullback lows following the tariff report on Monday and 1.0335 is the most notable area of interest, the old November low. GBPUSD follows suit and slips back below 1.25 having broadly respected its initial resistance at the 20-day EMA.

The JOLTS report saw surprisingly elevated job openings in November but the quits rate reversed a surprise increase from back in October.  

• Job openings 8090k (cons 7740k) in Nov after an upward revised 7,839k (initial 7,744k) in Oct.
• The ratio to unemployed 1.13 after an upward revised 1.12 (initial 1.11). It edges to what’s technically a fresh high since June, off a low of 1.08 in Jul and Sep, but has more broadly stabilized at 1.1 since July. These are levels last seen in mid-2021.
• It clearly remains low by recent standards having averaged 1.21 in Q2 for close to the 1.19 seen in 2019 although is still elevated compared to earlier pre-pandemic years such as the 1.00 averaged in 2017-18.
• The quits rate dropped back to 1.92% after a slightly downward revised 2.06% in Oct (initial 2.09).
• It’s an important reversal after October surprisingly saw its first monthly increase on a rounded basis since May 2023.
• It pokes through the 1.95 in Sep for its lowest since Jun 2020. 2019 av 2.33, 2017-18 av 2.20.