GILTS: Little Changed, PMIs Add To Stagflationary Fears
Feb-21 10:35
Gilts stick within the ranges established earlier in the week.
- Yields ~1bp higher across the curve, 2.5-4.0bp off the session lows that came in the wake of the soft French services PMI, with the German PMIs countering that rally.
- Domestic PMIs had little market impact, even as they underscored stagflationary worry.
- The UK PMIs noted demand weakness, while highlighting employment and input cost increases being passed through to output prices.
- The surveys also warned that firms indicated a further steep decline in staffing numbers, largely in response to the higher payroll costs and weak demand.
- This will make for difficult reading for the BoE MPC, especially with an increasing number of Committee members already appearing to be more attuned to growth concerns as the primary downside economic risk.
- The next 25bp BoE cut is still fully discounted though the June MPC, with ~48.5bp of easing showing through year-end.
- Macro and cross-market cues eyed ahead of the weekend.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.451 | -0.4 |
May-25 | 4.264 | -19.0 |
Jun-25 | 4.202 | -25.2 |
Aug-25 | 4.073 | -38.1 |
Sep-25 | 4.044 | -41.0 |
Nov-25 | 3.983 | -47.1 |
Dec-25 | 3.970 | -48.5 |
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GERMAN AUCTION RESULTS: 15-year Bund results
Jan-22 10:35
| 2.60% May-41 Bund | 2.50% Jul-44 Bund | |
| ISIN | DE000BU2F009 | DE0001135481 |
| Total sold | E1.5bln | E500mln |
| Allotted | E1.129bln | E392mln |
| Previous | E0.805bln | E0.812bln |
| Avg yield | 2.74% | 2.74% |
| Previous | 2.64% | 2.61% |
| Bid-to-offer | 1.82x | 3.10x |
| Previous | 1.61x | 2.49x |
| Bid-to-cover | 2.42x | 3.95x |
| Previous | 2.00x | 3.06x |
| Avg price | 98.16 | 96.47 |
| Low price | 98.15 | 96.45 |
| Pre-auction mid | 98.154 | 96.445 |
| Prev avg price | 99.48 | 98.33 |
| Prev low price | 99.48 | 98.32 |
| Prev mid-price | 99.439 | 98.292 |
| Previous date | 06-Nov-24 | 20-Mar-24 |
FOREX: EURUSD Resilience Persists, Extends Recovery Above 1.0450
Jan-22 10:32
- Single currency strength remains notable on Wednesday, as EURUSD continues to push session highs above 1.0450 in recent trade. The ongoing rally for major equity indices has likely been supportive of the broader dollar offer, while the lack of concrete details on tariffs for Eurozone countries and short-term positioning may be bolstering the Euro relief rally.
- Latest bullish developments for EURUSD are being monitored closely. Most notably, the pair has extended above trendline resistance drawn from the Sep 30 ‘24 high, narrowing the gap to the 50-day EMA at 1.0461. Clearance of this average would strengthen a bullish condition and would signal scope for a greater recovery to 1.0568, the Dec 10 high.
- EUR crosses are also performing well, with EURJPY up 0.4% and the likes of EURGBP and EURCHF holding close to their recent highs of 0.8473 and 0.9461 respectively.
- Aside from Trump related risks, the Eurozone data calendar is headlined by the January flash PMIs on Friday. Data will help set the tone for sentiment heading into 2025, with questions still remaining around the likely pace and magnitude of ECB rate cuts later this year.
- As a reminder, President Lagarde’s interview with CNBC did not come across as particularly dovish compared to recent GC commentary or her prior interview with the FT on December 23.
SLOVAKIA: Opposition Cries Foul, Vows To Table Another No-Confidence Motion
Jan-22 10:30
Slovak opposition withdrew a no-confidence motion against PM Robert Fico's cabinet from parliament after the government fought back, with the premier accusing his rivals planning a "coup" against legally elected officials. However, opposition lawmakers are reportedly preparing to repeat their attempt to unseat the government soon.
- Yesterday's debate in parliament took place behind closed doors after Fico said he would be citing classified information from a report provided by the Slovak Intelligence Service (SIS).
- Denik N reported that President Peter Pellegrini was due to visit SIS headquarters this morning to discuss the classified report but there would be no update for the media.
- The main opposition Progressive Slovakia (PS) party said it would request convening an extraordinary oversight committee to investigate an alleged misuse of the SIS by the government.
- Furthermore, PS leader Michal Simecka announced that the opposition will make another attempt to call a special meeting of parliament and table a no-confidence motion against the government.
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