REFINING: Manali Refinery Plans CDU Maitenance in Aug.-Sept.

The deterioration of the German labour market slowed in Q1 according to detailed quarterly data released by Destatis. Employment declined for a third consecutive quarter in Q1 but less materially than before, at -0.02% Q/Q vs -0.03% in Q4 (and a Q3 which was the second-worst quarter since the global financial crisis). Sentiment also improved recently with the IFO employment barometer at 10-month highs; in April, German employment was unchanged (Destatis data from this morning). May employment agency data is scheduled for release at 0855 BST / 0955 CEST, with consensus for a rise in unemployment by 12k (4k April) and the u/e rate to remain unchanged at 6.3%.

• The industrial sector saw its seventh consecutive quarter of declining  employment, at -0.47% Q/Q vs -0.36% Q4. Manufacturing cuts accelerated recently (-0.64% Q/Q, worst since Q2'20).
• The "public service providers, education, health" cluster rose by 0.20% Q/Q (vs 0.38% Q4), the lowest rate since Q1'23 (potentially influenced by the government's preliminary budget management).

EUREX ROLL VIEWS: Looking ahead into Friday and especially next Week, the Roll pace will be picking up, expiry is the 6th June.

JPM:

• Buxl: Bullish.
• Bund: Bullish.
• Bobl: Bullish.
• Schatz: Neutral.
• OAT: Bullish.
• BTP: Bearish.
• BTS: Bearish.

MS:

• Buxl: Mildly Bullish.
• Bund: Mildly Bearish.
• Bobl: Neutral.
• Schatz: Mildly Bearish.
• OAT: Neutral.
• BTP: Bearish.

CITI:

• Buxl: Neutral.
• Bund: Bearish.
• Bobl: Bearish.
• Schatz: Bearish.
• OAT: Bearish.
• BTP: Bearish.

Gilt futures pierce yesterday’s low, with global long ends under some pressure following sub-par demand at the latest 40-Year JGB auction.

• GU5 bases at 91.05, before recovering to 91.15.
• Fresh downward momentum would expose the 23 May low (90.46).
• Yields ~3bp higher across the curve.
• 10-Year spread to Bunds ~1.5bp wider at ~215bp, on track for the highest close since mid-April. A cluster of April closing highs at 218.3/218.8bp presents the next upside areas of interest.
• The opening downtick in bonds applies some pressure to SONIA futures, which are now flat to -2.0.
• BoE-dated OIS prices ~35bp of cuts through year-end vs. 36bp ahead of the gilt open.
• On the supply front, the DMO will sell GBP2.75bln of the 0.875% Jul-33 green gilt this morning.
• The DMO has also announced that a new long 13-year linker (maturing 2038) will be via syndication in the W/C 9 June. The timing is as we expected, but this maturity choice was not fully expected.
• On net, these supply matters may be weighing a little on gilts.
• A text covering comments from BoE chief economist Pill will be released today (on the topic of “monetary policy: taking a walk on the supply side”) although don’t expect it to be market moving as the address was given on Thursday of last week.
• A reminder that Pill has already reaffirmed his position at the hawkish end of the BoE spectrum after lodging a dissenting vote earlier this month (to leave rates on hold).