GILTS: Little Changed To A touch Softer, BoE's Mann Due Later
Feb-08 08:32
A very narrow start for gilt futures, oscillating around late Wednesday levels, sticking within a 19-tick range, last -27 at 98.31, just off lows. Well-defined technical parameters remain in play for that contract (97.57/99.17 present the initial lines in the sand).
- Cash gilt yields are flat to +1.5bp, with a light bear flattening bias on the curve.
- STIR markets are pretty much in line with pre-gilt open levels. SONIA futures sit 0.25 to 4.5 lower through the blues, while BoE-dated OIS shows ~84bp of cuts through ’24.
- Overnight domestic headline flow has seen some focus on a slightly less negative RICS house price reading and the latest KPMG-REC labour market report, which pointed to another round of loosening.
- Comments from BoE hawk Mann (15:00 London) headline the local docket today.
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GILTS: Citi Look Into Who Is Buying Gilts
Jan-09 08:27
Citi note that “there is another £64.7bn of glit issuance due this quarter, plus £8.2bn QT sales, to round off a record fiscal year for issuance (adjusting for BoE flow).”
- “Summing BoE net purchase data across broad investor types (domestic private, overseas, domestic banks) maps very well vs. net gilt supply (gross less redemptions, adjusted for QE/QT).”
- “It is immediately apparent that the pick-up in issuance has been met by domestic demand with little shown from overseas.”
- “This is a significant change given overseas investors were the number one net buyers of gilts in 12 of the last 16 years.”
- “Another emerging change is the pick-up in demand from UK banks.”
- “This again is a significant change given UK banks were net sellers of gilts in the previous 6 years.”
- “The pick-up in demand by UK banks correlates with cheaper gilt ASW: further adjustment may be necessary to further entice this investor base.”
GILTS: A Heavier Start, Familiar Levels Remain In Play
Jan-09 08:23
Gilt futures operate ~40 ticks below settlement levels at typing, just off the base of the early 100.01-110.23 range.
- Technical parameters haven’t moved on from yesterday.
- Gilt futures maintain a softer tone and the contract is trading closer to its recent lows. Last week’s move lower resulted in a break of the 20-day EMA, suggesting scope for a continuation of the bear cycle near-term. This has exposed support at 98.97, the Dec 6 high. On the upside, initial firm resistance to watch is at 101.98, the Jan 3 high. A break would ease bearish pressure., with a light steepening bias seen.
- Cash gilt yields are 2-4bp higher across the curve.
- SONIA futures & BoE-dated OIS are little changed vs. pre-gilt open levels.
- We get the first round of this week’s double gilt supply from the DMO later today via GBP2.25bln of the 20-year 4.75% Oct-43 line. This will be the first reopening of the gilt that was launched via syndication in November for GBP7.0bln (from books of GBP93.6bln). Outside of that syndication, the last time a gilt with a residual maturity of 17-23 years was sold was October 2021. The closest comparable reopening in 2023 was probably for the 1.125% Jan-39 gilt in August (which saw a bid-to-cover of 2.51x and tail of 0.8bp).
CROSS ASSET: Equities and bonds push to session lows
Jan-09 08:21
- US Treasuries, EGBs and Equities are all drifting to session lows, albeit still well within Yesterday's range.
- The move though, provides a bid into the USD, at session high against the JPY, EUR, CAD, AUD, GBP, and the SEK.
- Early liquidity across asset is thin, which helps exacerbate some of the moves.
- Support in EURUSD is further out, down to 1.0893 initially.
