BOE: Market Confusion Over Financing of BoE Bond Buys Settles
Sep-28 11:33
- Fielding a few questions and queries about the financing of the BoE's new bond-buying programme. Some confusion appeared to circulate as Sky News' Ed Conway tweeted "Importantly, this bond-buying scheme will NOT be financed by printing money"
- It appears this tweet (which was live for about an hour) prompted a lot of head-scratching and this eventual headline: *BOE BOND BUYING TO BE FINANCED WITH NEW RESERVES: SPOKESPERSON - bbg
- Appears to be the driver of GBP, with GBP/USD shifting lower to touch new intraday lows at 1.0541.
- Ed Conway has now deleted the original tweet and issued a correction: https://twitter.com/EdConwaySky/status/15750845723...
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US EURODLR FUTURES: Re-Pricing Hawkish Policy Messaging
Aug-29 11:07
Lead quarterly EDU2 off early overnight low of 96.5725 currently 96.595 (-0.030). No LIBOR settlements this morning due to London bank holiday, resume Tuesday. For reference: Friday's 3M LIBOR set' climbed +0.02643 to new 14Y high: 3.06957%, +0.11186 total last wk.
- Under pressure as rates re-price Fed/ECB hawkish messaging to contain inflation: Balance of Whites (EDZ2-EDM3) trade -0.055-0.095, Reds through Golds (EDU3-EDM7) -0.105-0.090, Reds-Greens underperforming.
- Current inversion pricing: Mar'23/Jun'23 -0.025 vs. -0.060 last Friday; calendar spds: EDZ2/EDZ3 at -0.315 vs. -0.380 Fri, EDH3/EDH4 at -0.540. Inversion flattens out in Gold Sep'27/Dec'27 trading +0.010.
- Really limited volumes as option traders pulled up stakes well ahead of Friday's event risk surrounding the Jackson Hole eco-summit. Thu's buy of 70,000 short Dec SOFR 95.50/96.00/96.50 put flys at 8.5 had the right idea: hedging higher rates for longer as short end underlying futures start pricing in more rate hikes through year end. Continued put spd buying and vol selling via strangles reported with today's event risk in the rear view mirror.
BONDS: EGBs: Looking ahead to Lane
Aug-29 10:58
- EGBs are still lower across the board, but 10y yields have moved off their earlier highs as European natgas prices have continued their move lower (with the latter now 20% off the highs).
- Rather than the curve having seen a parallel move, curves are now bull flatter on the day by a couple of basis points.
- ECB Chief Economist Philip Lane will appear on a panel at 14:00BST / 15:00CET entitled "High Inflation and Other Challenges for Monetary Policy." His comments will be closely watched after the ECB sources story from Reuters on Friday afternoon that stated some policymakers want to discuss a 75bp hike at the upcoming September monpol meeting.
- Bund futures are down -1.42 today at 148.54 with 10y Bund yields up 10.8bp at 1.494% and Schatz yields up 12.5bp at 1.093%.
- BTP futures are down -1.03 today at 120.47 with 10y yields up 9.5bp at 3.786% and 2y yields up 13.9bp at 2.046%.
- OAT futures are down -1.13 today at 138.37 with 10y yields up 10.0bp at 2.114% and 2y yields up 11.9bp at 0.913%.
US TSYS: Yields Higher in Eco-Summit Aftermath
Aug-29 10:50
Tsys trading weaker on more modest overnight volumes with London markets closed for bank holiday. Yield curves mixed (2s10s +1.538 at -34.653, 5s30s -2.153 att -3.798), short end steeper following Fri's bear flattening following KC Fed's Jackson Hole economic summit.
- Tsy 2YY tapped 3.4804% high - highest since November 2007 as hawkish summit messaging continued through Saturday after Fed Chairman Powell communicated the Fed needs to get restrictive and STAY restrictive for an extended period of time.
- ECB: Governing Council member Martins Kazaks said the ECB needs to act forcefully and raise interest rates by at least a half-point next month to bring inflation back under control.
- Equities trading weaker at the moment, ESU2 -35.25 at 4024.25; US$ index tapped 109.478 high overnight.
- Limited economic data to kick off new week: Dallas Fed Manf. Activity (-22.6 prior, -12.2 est) at 1030. US Tsy $54B 13W and $42B 26W bill auctions at 1130ET.
- Fed speak later this afternoon: Fed VC Brainard Chicago FedNow Workshop, text, no Q&A at 1415ET.
- Currentlyt, the 2-Yr yield is up 4.7bps at 3.4436%, 5-Yr is up 6.7bps at 3.2718%, 10-Yr is up 6.5bps at 3.1061%, and 30-Yr is up 4.5bps at 3.2365%.
