OPTIONS: Expiries for Jul31 NY cut 1000ET (Source DTCC)

Lagged monthly BoE data points to foreign participants selling gilts for the fourth month in five in May, with local financial institutions adding to their holdings for a tenth consecutive month and domestic private investors adding to their holdings for the fourth month in five.

• Citi suggest that one possible explanation for foreign investors shedding their gilt exposure is “the strength of GBP/USD, prompting net selling to meet slow-moving FX reserve allocations set in USD”.
• This pure flow element is probably intensified by worry surrounding the UK’s fiscal fragility.
• While the domestic bid has provided satisfactory demand for gilts in recent weeks, aided by moves to shorten the WAM of paper on offer, the DMO would no doubt prefer to see a more receptive international investor base, particularly with issuance risks skewed higher over the medium-term.

Fig. 1: Net Change In Gilt Holdings Of Different Investor Cohorts (GBP mln)

Source: MNI - Market News/BoE

• RES 4: 149.28 High Apr 3  
• RES 3: 148.65 High May 12 and a reversal trigger
• RES 2: 146.19/148.03 High Jun 24 / 23
• RES 1: 145.04 50-day EMA  
• PRICE: 143.16 @ 14:14 BST Jul 1
• SUP 1: 142.68 Intraday low   
• SUP 2: 142.12 Low May 27 and a key short-term support 
• SUP 3: 141.96 76.4% retracement of the Apr 22 - May 12 upleg
• SUP 4: 141.49 Low Apr 23    

A bear threat in USDJPY remains intact and today’s sell-off reinforces this theme. The Jun 23 shooting star candle formation highlighted a reversal of the recent recovery. Note too that price has traded through the 20- and 50-day EMAs. A clear break of the averages strengthens a bearish threat and opens 142.12, the May 27 low and a key short-term support. On the upside, a move above 148.03, the Jun 23 high, would reinstate a bullish theme.

There have been mixed reports from Capitol Hill on the status of negotiations between Senate Republican leadership and GOP holdouts as the 'vote-a-rama' on the One Big Beautiful Bill continues. So far, no clues on when the bill could be put on the floor for an up-down vote.

• As noted in previous bullet, Senate Majority Leader John Thune (R-SD) needs to flip one of the two wavering moderate senators, Lisa Murkowski (R-AK) and Susan Collins (R-ME). See: US: Senate Vote-A-Rama On Big Beautiful Bill Enters Second Day 1/2
• Andrew Desidero at Punchbowl reports: "The mood has turned upbeat inside the chamber. Graham, Crapo, Barrasso and Murkowski were discussing how to sequence possible votes including a substitute."
• Lisa Desjardins notes on X, in a post suggesting the vote-a-rama may have hours left to play out: "The bottom line at this moment is simple: Senate Republicans currently do not have the votes for the OBBBA... The Senate is in a bleary-eyed doom loop at the moment, Voting on amendments, slowly, as Republicans seem to stall for time and Democrats still have amendments proposed."
• Our baseline scenario remains that the Senate will pass the bill today, likely after some horse trading with holdouts and GOP leadership. President Donald Trump will accelerate outreach to wavering Senators, although may be less effective than with House members who face a more immediate electoral threat.
• VP JD Vance, in the Capitol to cast a tie-breaking vote if required, will also apply additional pressure on wavering lawmakers.