RENEWABLES: German Wind Output Forecast Comparison

CIBC note that “modified duration will remain basically unchanged (-0.005yrs) across the FTSE Canada Universe Bond Index, Short, Mid, and Long segments on January 2, with no bonds rolling out or moving down the maturity bucket on that day. Coupon payments of approximately C$8mln on January 2 will have minimal impact to the duration change in the Universe Index”.

• “Meanwhile, the Bloomberg Global Aggregate Canadian Float Adjusted Bond Index, which rebalances monthly on the last business day, is set to experience a more notable duration extension of +0.096yrs on December 31. This adjustment may drive some bond buying activity near month-end, as non-domestic investors who usually track this index will need to stay aligned with their benchmark”.

Post-GDP weakness in Tsys weighs on gilts, pulling the space further away from session highs.

• Futures get close to but don’t quite fully close the opening gap (90.74), with the contract basing at 90.76, then recovering to ~90.85.
• Initial support of note located at 90.50.
• Resistance at the 20-day EMA (91.17) was breached during this morning’s rally, but bulls failed to regain momentum, with the next key upside level (91.93) remaining unchallenged.
• As we move into ’26, markets continue to assess the outlook for BoE policy.
• BoE-dated OIS shows ~50% odds of 2 25bp cuts being deployed come the end of the November MPC.
• This week’s (limited) SONIA options trade has seen a bias towards dovish plays, via the SFIJ 97.00/97.25 call spread and SFIJ6 96.55/96.65/96.75/96.85 call condor.
• While inflation slowed at a swifter than envisaged pace in the latest reading, the BoE decision that followed provided a ‘hawkish cut’.
• We think that progress on headline CPI and official labour market data alone will not be sufficient to justify the next cut. It is likely that the Bank will also need to see progress on inflation expectations data as well as further DMP prints and a non-adverse result from the Agents' Pay Survey.
• Elsewhere, fiscal uncertainty continues to linger in the background despite Chancellor Reeves ‘credible’ Budget.
• Some remain sceptical, given the optimistic GDP growth forecasts and questions whether the relatively backloaded fiscal tightening will be deployed in full given the timing of the next general election.
• OI data continues to point to relatively low conviction trade in gilt futures since the Budget.

• +5,000 FVH6 109-02.25, buy through 109-02 post time offer at 0920:21ET, DV01 $220,000.
• The 5Y contract trades 109-01.25 last (-6.25)