RENEWABLES: German Wind Output Forecast Comparison

SFIH6 96.55/96.65cs, bought for 3.75 in 3.8k.

Gilt futures have pierced previous session highs, with lower crude oil helping to underpin (albeit off session lows) and little feedthrough from a move away from best levels in Tsys apparent.

• Futures move through Fibonacci resistance (92.72) topping out at 92.77 for now.
• Next upside level of note comes in at round number resistance (93.00), which protects another Fibonacci point (93.13), with the recent bull cycle accelerating further.
• Yields are flat to 3bp lower, curve flatter. July lows intact and untested across the major benchmarks.
• SONIA futures -1.0 to +4.5.
• BoE-dated OIS continues to signal a little over 50bp of easing through year-end, with a 25bp cut more than 90% discounted for this week’s meeting.
• Looking ahead, final services PMI data and GBP4.5bln of 4.50% Mar-35 gilt supply is due tomorrow.

The SONIA/Euribor Dec ’26 Spread has formed double bottom support in the 145.5/146bp area, with focus on this week’s BoE vote split key given almost full discounting of and unanimous expectations for a 25bp cut on Thursday.

• With the market now more assured when it comes to pricing the ECB terminal rate (leaning towards one further 25bp cut in this cycle) any meaningful repricing is likely to come from the SONIA leg of the spread.
• Goldman Sachs remain long SFIZ6 vs. ERZ6.
• Signs of a slowing UK labour market have not been enough to promote a meaningful dovish repricing across ’26 SONIA spreads as of yet, with the SFIZ5/Z6 spread discounting just over 25bp of easing.
• With sticky inflation worries no doubt present, BoE cues may be required for a fresh extension lower, if such a move is to be forthcoming.
• We will provide deeper insight in our BoE preview but remind that the accompanying guidance at this week’s BoE decision is widely expected to be left unchanged with the "gradual", "restrictive" and "careful" buzzwords all likely to remain.
• Based on the 17 previews that we had read as of Friday providing vote split expectations:
• The modal expectation is a 2-5-2 vote split (7/17).
• 11 expect two votes for 50bp cut, 3 expect one vote, 3 expect no votes for 50bp cut
• 2 expect three votes for on hold, 9 expect two votes on hold, 4 expect 1 vote on hold, 2 expect no votes for on hold.
• 2-4-3 (50-25-0) is the most split committee within an analyst's base case, 0-9-0 is also an analyst's base case.

Fig. 1: SONIA/Euribor December ’26 Spread

Source: MNI - Market News/Bloomberg Finance L.P.