GILTS: Futures Through Next Resistance Cluster
Gilts rally alongside EGBs, with solid to strong demand at this morning’s French & Spanish bond auctions driving the move.
- Upticks in crude oil & European equity futures, as well as the presence of the aforementioned EGB supply, weighed early today.
- Futures trade through yesterday’s highs to 92.45.
- A cluster of resistance levels in the contact have been pierced, presenting a stronger reversal.
- Next upside level of note located at Fibonacci resistance (92.79).
- Yields are 3-4bp lower, 30s outperform.
- 10s last 4.57%, still above long-term uptrend support drawn off the Dec ’21 low (4.504% today).
- 2s10s consolidates the close below 60bp, while 5s30s prints below 120bp for the first time since mid-April.
- Dovish move in GBP STIRs alongside the rally in gilts.
- BoE-dated OIS shows 16.5bp of cuts through August, 21bp through September, 36bp through November and 43.5bp through year-end. Contracts little changed to 2bp more dovish on the day.
- SONIA futures flat to +4.5. Implied terminal policy rate pricing on the strip has moved to 3.56%, ~22bp off May’s hawkish extreme.
- The ONS revealing that it overstated April Y/Y CPI by 0.1ppt seemingly fed into a dovish move at the open, with long end swings driving things since.
- No comments of note seen from BoE’s Greene & Breeden.
- The UK calendar is thin for the remainder of the day, which should leave focus on broader macro drivers.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.214 | +0.2 |
Aug-25 | 4.048 | -16.4 |
Sep-25 | 3.999 | -21.2 |
Nov-25 | 3.852 | -35.9 |
Dec-25 | 3.776 | -43.5 |
Feb-26 | 3.667 | -54.4 |
Mar-26 | 3.647 | -56.4 |
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GERMAN AUCTION RESULTS: 2.40% Apr-30 Bobl
| 2.40% Apr-30 Bobl | Previous | |
| ISIN | DE000BU25042 | |
| Total sold | E4.5bln | E4.5bln |
| Allotted | E3.48bln | E3.549bln |
| Avg yield | 2.07% | 2.06% |
| Bid-to-offer | 0.95x | 1.09x |
| Bid-to-cover | 1.23x | 1.38x |
| Avg Price | 101.54 | 101.57 |
| Low Price | 101.53 | 101.57 |
| Pre-auction mid | 101.514 | 101.540 |
| Previous date | 15-Apr-25 |
EGBS: Bund Futures Temporarily Spike As Merz Falls Short Of Chancellor Majority
Bund futures spiked from ~130.75 to a session high of 131.08 after German CDU leader Merz failed to be approved as Chancellor in the first round of Bundestag voting. However, RXM5 has since eased back to 130.89 (-17 ticks versus yesterday’s settlement levels), with Merz still expected to be confirmed as Chancellor in subsequent votes despite the embarrassing first round result.
- The light upside in Bunds, relative to before the initial headlines crossed, reflects slightly increased risks of more contained German fiscal easing in the coming years than had previously been expected.
- The German curve has twist steepened, with Schatz yields down 0.5bps and 30-year Bunds up 2.5bps.
- The political volatility comes against a backdrop of sizeable German supply: A 30-year syndicated tap (MNI expects E4-6bln) and E4.5bln of the 2.40% Apr-30 Bobl (bidding deadline at 1030BST).
- Austria sold RAGBs earlier this morning.
- Data has not been market moving: The Eurozone April services PMI saw very similar themes to last week’s manufacturing PMI round, with Spain weaker than expected, Italy stronger than expected and upward revisions seen in France/Germany. Eurozone March PPI was softer-than-expected at -1.6% M/M (vs -1.4% cons, 0.2% prior).
- 10-year EGB spreads to Bunds have widened modestly, with European equities weakening through the course of the morning, exacerbated by the latest German headlines.
EQUITIES: BBVA Strangle Option
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