GILTS: Key Support Pierced In Futures
Aug-15 14:40
Pressure stemming from U.S. data and weakness in EGBs pushed gilt futures through the bear trigger (91.08), with the contract basing at 90.98 before ticking away from worst levels.
- Fibonacci support (90.97) was respected even as bears solidified technical control. A break there would expose the May 29 low (90.59).
- Yields are 1-6bp higher, with curve steepening cues coming from peers.
- 30s haven’t managed to breach cycle closing highs at 5.580%, while 50s near the psychological 5.00% level.
- We had flagged the risks of further curve steepening on several occasions in recent weeks.
- 2s10s hasn’t managed to threaten cycle closing highs (78.61bp) as of yet, but 5s30s is on track for the highest close of the cycle, nearing the psychological 150bp level.
- SONIA futures little changed to -4.0.
- BoE-dated OIS continues to price some chance of a cut come November (~8bp priced), although a hawkish CPI release could further impact pricing next week (more on that to come in our Global Week Ahead document and full data preview).
- The next BoE cut is essentially fully discounted come the end of the February MPC after this week’s UK data and spillover from U.S. monetary policy pricing provided hawkish impulses.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.972 | +0.5 |
Nov-25 | 3.886 | -8.1 |
Dec-25 | 3.829 | -13.9 |
Feb-26 | 3.724 | -24.3 |
Mar-26 | 3.683 | -28.4 |
Apr-26 | 3.608 | -35.9 |
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MNI: US EIA: CRUDE OIL STOCKS EX SPR -3.86M TO 422.2M JUL 11 WK
Jul-16 14:30
- US EIA: CRUDE OIL STOCKS EX SPR -3.86M TO 422.2M JUL 11 WK
- US EIA: DISTILLATE STOCKS +4.17M TO 107.0M IN JUL 11 WK
- US EIA: GASOLINE STOCKS +3.4M TO 232.9M IN JUL 11 WK
- US EIA: CUSHING STOCKS +0.21M TO 21.4M BARRELS IN JUL 11 WK
- US EIA: SPR -0.3M TO 402.7M BARRELS IN JUL 11 WK
- US EIA: REFINERY UTILIZATION WEEK CHANGE -0.8% TO 93.9% IN JUL 11 WK
CHINA: Analyst Views On Growth Outlook/Stimulus Measures After Q2 GDP
Jul-16 14:29
- Commerzbank says that domestic demand faltered in June and while exports held up, the trade outlook in H2 is highly uncertain as US tariffs for trading partners have yet to be finalised. They expect Beijing to provide further support to real estate in the July Politburo meeting given the renewed weakness in the sector. Their concern is that once the stimulus stops, the macro picture will worsen. It is likely that the stimulus would only provide a temporary boost without lifting the underlying domestic demand weakness.
- DBS believes that weak private sector credit demand calls for easing. They expect additional 20bp LPR and 50bp RRR cuts to support growth in H2. Short-term 2-year CGB yields should face downward pressure. Long-term yields should remain supported by growth optimism from fiscal policy initiatives. Potential stimulus measures from the Politburo meetings, such as urban redevelopment projects, cash handouts, tax cuts and removal of restrictions on auto purchases, may lead to increased long-term bond issuance, likely resulting in a steeper yield curve.
- Goldman Sachs now expects China’s real GDP growth to fall from 5.3% y/y in H1 to 4.3% y/y in H2, due mainly to the adverse impact of US tariff increases and a much higher base (especially for Q4). With H1 real GDP growth still solid, they do not think policymakers see the immediate need to launch broad-based, significant stimulus in the near-term (including at the July Politburo meeting). Instead, GS expects incremental, targeted easing to help stem the property downturn and mitigate labour market pressures in H2.
- MUFG expects the government to further implement announced policy plans, but largely, fiscal stimulus is likely to remain reactive. They expect China GDP growth to decelerate to 4.2-4.3% y/y by Q4 this year. In their view, the growth deceleration and a narrower current account surplus is likely to put moderate pressure on CNY, with USDCNY reaching 7.25 by Q3. Risks for USD/CNY exist in both directions.
- SocGen says that despite a strong H1, the outlook is set to sour in H2 as export frontloading fades and the impact of US tariffs becomes more visible. Renewed weakness in house prices and the fading impact of subsidies also cast doubt over the sustainability of the consumption recovery. More stimulus towards housing and domestic demand will still be needed to achieve this year’s GDP target, likely after the summer. But for the upcoming July Politburo meeting, policymakers will likely be in a wait-and-see mode.
GILTS: TD Recommend 5s30s Flattener
Jul-16 14:22
TD Securities recommended a 5s30s gilt flattener late on Tuesday, targeting a move to 110bp, with a stop set at 160bp.
- They noted that “2025 trading biases have been dominated by duration bears.”
- In terms of reasoning and looking ahead, they believe that “we will need some significantly weak data for markets to drift from 2 BoE cuts to the 3 cut scenario” (for ’25). Noting that “cracks in growth/labour markets are emerging, but the move has been rather slow”.
- Elsewhere, they believe that “Chancellor Reeve's fiscal buffers are more likely to be rebuilt via taxes/spending cuts rather than more supply. Furthermore, any small increases in issuance are likely to come via bills”.
- TD also highlight “the BoE has continued to signal a slowdown in QT pace”, which should help promote flattening.
