GILTS: Little Changed, Long End Yields Eying Clean Break Below M-Term Supports
Gilts initially trade lower on ongoing bearish cues from EGBs, before wider stabilisation in core global FI markets limits losses.
- Futures last -7 at 91.69 vs. session lows of 91.64.
- Bulls remain in technical control with the recent pullback deemed corrective by our technical analyst.
- Initial support and resistance in futures located at 90.87 & 91.93.
- Yields essentially unchanged across the curve.
- November lows are intact across benchmark yields.
- Note that both 10- and 30-Year yields are threatening clean breaks below uptrend support drawn off their December ’21 lows (see chart below).
- Ongoing skew away from long end issuance by the DMO, a wider-than-expected fiscal buffer and the reduction in UK fiscal and political risk premia has promoted curve flattening post-Budget.
- This has also generated outperformance vs. Bunds, with the 10-Year spread now nearly 25bp below mid-November closing highs, last ~165bp. Next support located at the September ’24 low (162.01bp).
- The release of the DMO’s FQ4 operation schedule generally matched our expectations (see previous bullets for greater detail).
- Little of note on the UK calendar ahead of the weekend.
Fig. 1: UK 10- & 30-Year Yields (%)
Source: MNI - Market News/Bloomberg Finance L.P.
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RIKSBANK: Little Market Reaction With Decision Bringing No Surprises
As expected, little reaction in SEK FX and rates markets following the Riksbank decision and policy statement. Very light upside in NOKSEK appears driven by the NOK leg. There were no surprises in the Riksbank's guidance, and the decision was unanimous.
Continued labour market weakness was noted, though the Riksbank remains optimistic that a turnaround will take place soon (consistent with the September MPR projections).
"Growth was somewhat stronger than expected during the third quarter, according to preliminary statistics. At the same time, the labour market is still showing weak development, although there are now some signs that a turnaround is on its way. Overall, the outlook for inflation and economic activity remains largely unchanged."
RIKSBANK: Holds Policy Rate With Unchanged Guidance
The Riksbank holds the policy rate at 1.75% as unanimously expected. Guidance language was unchanged relative to September (as we had expected):
"The elevated inflation has begun to fall back, at the same time as economic activity is on its way to recovery. The outlook for inflation and economic activity thus remains largely unchanged and the Executive Board has decided to leave the policy rate unchanged at 1.75 per cent. The policy rate is expected to remain at this level for some time to come."
MNI: RIKSBANK LEAVES KEY POLICY RATE UNCHANGED AT 1.75%
- MNI: RIKSBANK LEAVES KEY POLICY RATE UNCHANGED AT 1.75%
