GILTS: Holding Lower
Jun-04 09:40
Gilts hold lower, with weakness in core global FI (given renewed focus/reports surrounding German fiscal easing and a rally in European equity benchmarks) spilling over.
- Futures -44 at 91.48, filling yesterday’s opening gap higher.
- The recent gains in the contract have allowed short-term oversold conditions to unwind, with the uptick considered corrective from a technical perspective.
- Initial support and resistance located at 91.16/92.11.
- Yields 1-3bp higher, 10s lead the sell off.
- 10s stick in the wide 4.40-4.80% range that has been in play since mid-January.
- The benchmark remains within the wedge drawn off the longer-term uptrend (beginning at the December ’21 lows) and the short run downtrend drawn off the ’25 high. It last trades at 4.67%, with the boundaries of the wedge located at 4.500% & 4.787% today.
- Fiscal fragility remains a topic of discussion in the UK. This morning has seen Chancellor Reeves once again stress that she has no intention of raising taxes at the same scale as was seen in the ’24 Budget.
- No real reaction was seen following the mark higher in the final services PMI print, gilts were already under pressure.
- Mar-28 supply from the DMO passed smoothly, although the cover was a touch below average.
- There is little of note on the UK calendar for the remainder of the day, with wider focus set to fall on the U.S. ISM services survey and macro inputs (tariff matters and European fiscal issues remain front and centre there).
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BONDS: Initial resistance in Bund Holds, Focus on the US ISM Today
May-05 09:34
- A lighter start for the German Bund and wider EGBs, the UK Markets are closed for their Bank Holiday, and Investors are turning their attention towards the FOMC on Wednesday, and will remain attentive to any Tariffs news.
- The initial small resistance noted at 131.16 Today has held, so far printed a 131.14 high.
- European peripheral spreads are closer to flat on the Margin.
- The Swiss CPI came below consensus earlier but had no impact on Govies, even the Swissy (CHF) now trades at higher level post the Inflation Data.
- There's still some Focus on the Data front for Today, the US services PMI will be final reading, but some attention on the US ISM services and its components.
- ECB Stournaras will speak at Forum in Athens later today.
FOREX: Greenback Edges Lower in Partial Reversal of Friday Rally
May-05 09:27
- The greenback is modestly softer against all others in G10, as markets partially retrace the phase of USD strength posted into the Friday close. EUR/USD is back above the $1.13 handle, which is helping support EUR/GBP above 0.8500. Trade deals and negotiations remain a key focus this week, as reports circulate deals could be announced by Friday. Japan, India and South Korea are seen among the nations with the most advanced negotiations.
- Meanwhile, after an extended period of consolidation, AUD/USD is gaining following the surprisingly strong showing for Anthony Albanese in the weekend's general elections. The price action puts the rate above the 200-dma and a close above would be the first since November last year. 0.6550 is the next key level here, marking the 61.8% retracement of the downleg posted off the late September low.
- JPY is among the strongest currencies in G10, benefiting from the modest pullback for US equity futures as well as firmer regional APAC currencies. The run higher in TWD has seen the central bank respond with a press conference today which, while not disclosing any new measures, saw the central bank talk down speculation that Taiwan would settle for a firmer currency at the request of the US.
- US ISM services data is the scheduled highlight Monday, with central bank speak quiet as the Fed remain inside their pre-meeting media blackout.
EQUITIES: Large Stoxx600 Option trade
May-05 09:11
SXXP (16th May) 550c, bought for 0.70 in 14k.
