GILTS: Fade From Early Highs, Little Changed Ahead Of Reeves' Appearance
Jan-14 10:37
The early bid in gilts fades alongside a similar move in wider global FI.
- Pressure around EU/EGB syndications, a move off lows in oil and continued questions surrounding medium-term French political and fiscal risks initially pushed bonds away from session highs. Oil has pulled back since.
- Gilt futures last flat at 89.30 vs. highs of 89.72.
- Bearish technicals intact, initial support & resistance located at 88.96/90.31.
- Yields little changed to 1.5bp lower on the day, curve steeper.
- 10s spread to Bunds 1.5bp tighter around 225bp.
- Decent demand at the latest 30-Year I/L auction did little to counter the pullback, although the DMO will have welcomed such results given the weakness in bonds seen in recent weeks alongside questions surrounding the UK’s fiscal health. Yield levels on offer will have aided takedown.
- BoE-dated OIS prices 42bp of cuts through ’25 vs. 44bp early today. Hawkish cycle extremes situated at 39bp.
- SONIA futures -1.5 to +1.0.
- Chancellor Reeves will appear in the Commons later today (around 12:30 London), with MPs set to question her on the UK’s fiscal outlook after the recent increase in market-based fiscal risk premia.
- Beyond that, tomorrow will see the latest round of CPI data (expect our full preview later today), comments from BoE dovish dissenter Taylor and an auction of the GBP4.00bln of the 10-year 4.25% Jul-34 gilt.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
Dec-13 21:13
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
Dec-13 21:00
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
Dec-13 20:40
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
