GILTS: Futures Through Key Resistance
Oct-14 09:24
Gilts have rallied on the back of the ongoing deterioration in Sino-U.S. trade relations and a soft UK labour market report.
- Futures pierce key resistance at 91.82. Bulls now look to the August 14 high (92.06).
- Yields are 5-7bp lower, 5- to 10-Year zone outperforms.
- 10s on track for the lowest close since mid-August, last 4.590%.
- The syndication of the 5.25% Jan-41 gilt sees the spread set at the tight end of the guidance range, with orderbooks (including JLM interest) topping GBP125bln.
- We pencilled in a sale of GBP4.0-8.5bln, with a bias towards the top end of that range. The bookbuild means that will be easily achievable.
- SONIA futures 0.5-7.5 higher.
- Liquid BoE-dated OIS 2-6bp more dovish on the day, ~9bp of easing now priced through year-end, next 25bp cut fully discounted come the end of the March MPC vs. April in recent weeks.
- GBP 1y1y threatens a move back below the broken downtrend line (3.5469%).
- BoE Governor Bailey will speak at 18:00 London. We will watch closely for any clues surrounding his preferences for the Q4 rate decisions.
- We see Bailey as the key swing voter on the finely balanced MPC.
- He previously pointed to a downside surprise in wage growth being one of his motivations for voting for an August rate cut. However, we aren't sure today’s data will convince him either way.
- Looking ahead, next week’s CPI report will be closely eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Nov-25 | 3.939 | -2.9 |
Dec-25 | 3.881 | -8.7 |
Feb-26 | 3.760 | -20.8 |
Mar-26 | 3.716 | -25.2 |
Apr-26 | 3.623 | -34.5 |
Jun-26 | 3.589 | -37.9 |
Jul-26 | 3.532 | -43.6 |
Sep-26 | 3.517 | -45.1 |
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AUSSIE 3-YEAR TECHS: (U5) Bounces Further Off Support
Sep-12 21:45
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.550 @ 15:36 BST Sep 12
- SUP 1: 96.430/95.900 - Low Sep 3 / Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures are trading off recent lows. A resumption of gains from here would further narrow the gap with resistance at 96.730, the Sep 17 ‘24 high, leaving 96.860 as the next key level. Any continuation lower would instead strengthen a bearish threat. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would open 96.860, the Apr 7 high.
FED: MNI Fed Preview-September 2025: A Reluctant Return To Easing
Sep-12 21:16
We've published our preview of the upcoming FOMC meeting - Download Full Report Here
- The Federal Reserve is set to resume its easing cycle at the September 16-17 meeting with a 25bp cut to the funds rate range to 4.00-4.25%.
- The decision to cut after a 5-meeting pause was well-telegraphed by Chair Powell, whose Jackson Hole speech described a “shifting balance of risks” toward a weaker labor market that “may warrant adjusting our policy stance”.
- The updated quarterly projections aren’t likely to bring many changes to the macroeconomic variables, but as usual the signal sent from the Fed rate “Dot Plot” will garner attention. A Committee split between expecting one or two further cuts this year is likely, keeping each of the remaining meetings of 2025 “live”.
- The Statement will downgrade the description of the labor market to reflect a rise in the unemployment rate and poor payrolls growth, and is likely to include at least one dissent to the rate decision.
- But with a Committee that is fairly divided on the way forward, Powell will be noncommittal on future action, reiterating that policy is not on a preset course, and upcoming decisions will be data-dependent.
- A key undercurrent is an increasingly activist approach to Fed personnel management from the White House, which leaves the composition of the FOMC uncertain not just over the medium-term but also at this meeting.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Sep 15
RATINGS: Fitch: France Cut To A+ From AA, Portugal Up To A From A-
Sep-12 21:07
Fitch has downgraded France's sovereign rating to A+ (with stable outlook) from AA-. Release here.
- Among other factors in the decision, Fitch cites "High and Rising Debt Ratio", "Political Fragmentation Hinders Consolidation", "Weak Fiscal Record", "High 2025 Deficit", "Uncertain Fiscal Consolidation Path", and "Fiscal Rigidities".
- In "Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade", Fitch cites "Public Finances: A sustained increase in government debt/GDP over the medium term, due to failure to implement fiscal consolidation measures and/or a persistent increase in financing costs" and "Macro: Materially lower economic growth prospects and weakened competitiveness." Conversely, potentially leading to positive ratings action would be "Public Finances: Confidence that government debt/GDP will be put on a downward trajectory over the medium term, for example, due to fiscal consolidation and/or stronger economic growth".
- Fitch also raised Portugal to A (stable outlook) from A-, while elsewhere, S&P raised Spain to A+ (stable outlook) from A.
- As MNI wrote earlier, we expected France to be downgraded to A+ and Portugal to be upgraded to A.
