UK FISCAL: Fmr OBR Chiefs Speak To Treasury Committee Ahead Of Spring Statement

{GB} GILTS: Gilts have roughly stuck to the ranges established shortly after the open, with yields lower on global cues (Tsy rally stemming from Rick Rieder reportedly becoming frontrunner in the Fed Chair race, downticks in long end JGB yields and ongoing geopolitical risks).

• Locally, the weekend saw the Labour NEC block Mayor of Manchester Andy Burnham’s application to run in a by-election. The market had already unwound the brief bout of ‘PM Burnham risk’ that was priced in last week. Still, there may be some background demand for UK paper on the news.
• Gilt futures +12 at 91.39 vs. highs of 91.56.
• Last week’s price action undermined a bullish technical theme. Trendline support drawn off the Nov 19 low (91.12 today) was pierced. Bears will look for a more meaningful move below there before targeting the Jan 2 low (90.70). Conversely, initial resistance is located at the Jan 22 high (92.13).
• Yields 1.5-3.5bp lower, curve flatter.
• 10s back below 4.50%, leaving early January highs (4.538%) untested at this stage. Triangle pattern formed, with boundaries at 4.346% & 4.513% today.
• On the supply front, the BoE will sell GBP675mln of long bucket gilts from its APF holdings this afternoon, while the DMO will auction GBP3.25bln of the 4.125% Mar-33 gilt tomorrow and tender GBP1.25bln of the 0.125% Jan-28 line on Thursday.
• SONIA futures -0.5 to +1.5, strip flattens. BoE-dated OIS pricing ~38bp of easing for the current cycle, after hawkish comments from BoE’s Greene and firm inflation PMI subcomponents factored in late last week.

• FX markets are exhibiting further volatility to start the week as last week's geopolitical developments, growing chances of another US government shutdown and US homeland security concerns keep the US dollar pressured and propel precious metals to fresh record highs.
• Unconfirmed ‘rate check’ reports from both the MOF in Japan and the NY Fed, have prompted USDJPY to fall more than 580 pips from Friday highs to 153.40 session lows this morning. While latest information regarding the BOJ accounts suggests no intervention, USDJPY has made light work of both the 20- and 50-day EMAs in the process, changing the technical complexion for the pair. The sharp pullback brings to an end the recent bull cycle and marks the start of a corrective phase. This signals scope for a deeper retracement and potential is seen for a move towards 151.98, a Fibonacci retracement. Initial resistance to watch is 156.24, the 50-day EMA.
• Dollar weakness is seen more broadly, with the DXY piercing below the 97.00 handle for the first time since last September, extending its decline over the last week to 2.5%. Moves are also pronounced against the antipodean currencies.
• Further strength in AUD today looks set to extend a winning streak to six sessions, resulting in the pair rising above 0.69 and trading within seven pips of the 2024 highs, located at 0.6942. This is a key resistance point, and above here, targets include 0.6991 and 0.7022, projections of Nov 21 - Dec 10 - 18 price swing. The trend is overbought and any pullback would allow this condition to unwind.
• For NZDUSD, we have rallied over 4.5% from the January lows to reach the highest point since September and 0.6007 and 0.6120 remain important chart levels for the pair.
• In terms of data, the calendar is light, with November durable goods the only release of note. ECB's Nagel and Kocher are unlikely to move the needle while the Fed remains in blackout ahead of Wednesday's expected hold. Focus is also on the potentially imminent announcement of the new Fed chair, with prediction market-implied odds of BlackRock fixed income CIO Rieder's surging to above 50% following reports of a Thursday meeting between Rieder and officials at the White House.

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