US TSY OPTIONS: Heavy Nov'26 10Y Trade

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• The BOE’s forecast for private sector regular pay growth is 2.80%Y/Y in the 3-months to June. This would be a deceleration from the 2.89%Y/Y in the 3-months to May. The median from the previews we have read also looks for 2.8%Y/Y in the 3-months to June, but analyst expectations are skewed to a softer print with the mean expectation at 2.76%Y/Y. Indeed, all 13 sellside forecasts that we have seen round to either 2.8% or 2.7%, with only just over half (7/13) forecasting 2.8%.
• Looking through the numbers we think the risks are more two sided than consensus expects - we explain why.
• The unemployment rate is forecast by the BOE to come in at 4.83% whereas the sellside forecasts we have seen are split between 4.7%, 4.8% and 4.9% with a median of 4.8% and a mean of 4.80%. With the 3-month print coming in at 4.86% last month, its easy to make an argument for any of 4.7%, 4.8% or 4.9% (when rounding to 1dp) - it depends on the degree of normalisation (or lack of) for the outlier cohort - we talk through the dynamics.

Long-end EGBs and Gilts remained under pressure Monday, with yields moving through last week's highs including some to multi-year highs.

• A lack of discernable progress on the US-Iran front over the weekend supported energy prices coming in from the weekend, and European yields picked up from last week's move in continuing to drift higher in the absence of evidence of a more lasting solution.
• An Iranian foreign ministry spokesman said the tentative 60-day "ceasefire" - due to expire Monday - no longer holds due to US violations.
• Bonds got a brief lift in late morning London trade after Al Arabiya reported that the ceasefire could be extended. But that ultimately was seen as too vague, and pressure resumed on EGBs/Gilts focused on the long-end.
• Even with oil prices closing off the lows, European yields would close near the highs, including 10Y Bund at a fresh 2011 closing high and 10Y OAT at a post-2008 closing high.
• Both the German and UK curves bear steepened on the day, with EGB periphery/semi-core spreads mixed though overall little changed (with BTPs underperforming).
• The week's schedule is highlighted by UK labour market (Tuesday) & CPI (Wednesday) data and flash PMIs (Friday).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.4bps at 2.803%, 5-Yr is up 0.9bps at 2.934%, 10-Yr is up 1.7bps at 3.221%, and 30-Yr is up 1.9bps at 3.746%.
• UK: The 2-Yr yield is up 1.1bps at 4.366%, 5-Yr is up 2.4bps at 4.588%, 10-Yr is up 2.3bps at 5.06%, and 30-Yr is up 2.6bps at 5.813%.
• Italian BTP spread up 1.4bps at 79.4bps / French OAT up 0.7bps at 84.3bps

• The unemployment rate is forecast by the BOE to come in at 4.83% whereas the sellside forecasts we have seen are split between 4.7%, 4.8% and 4.9% with a median of 4.8% and a mean of 4.80%.
• Looking at the single month prints here its clear to see that Cohort 3 (in the chart) is higher than the other two cohorts with the single month print of March coming in at 5.37%.
• With the 3-month print coming in at 4.86% last month, its easy to make an argument for any of 4.7%, 4.8% or 4.9% (when rounding to 1dp).
• For 4.9%, we just need a repeat of the March single month print (or a very marginal drop from 5.37% to 5.35%). 
• For 4.7% a single month print of 4.75% to 5.04% (for reference April and May both round to 4.6%).
• Whereas a print in line with consensus of 4.8% would need a single month print of 5.05% to 5.34%.
• The employment change is expected anywhere between 100k and 180k from the previews we have read.
• The full UK labour market preview will be out in the next few minutes.