NBP: Market On Lookout For Updated Forward Guidance In Today's Presser (2/2)
Jun-05 09:40
- mBank write that the MPC the statement proved more laconic than expected and included no forward guidance ahead of the July meeting. In their view, the only meaningful adjustment was removing the phrase 'wage growth is still running at a high level', which may have been intended as a signal that wage growth is expected to slow down more significantly later in the year. They still think that continued disinflation and a correction of the recent upside surprise in wages will increase the probability of a cut in July, but they wait for the presser to confirm or disconfirm this hypothesis.
- Millennium Bank don't see any important new themes in the statement. However, they think that the importance of fiscal policy increased in the MPC's reaction function because the outcome of the presidential election creates risks for fiscal consolidation. Besides this, near-term inflation outlook has improved, which should be confirmed in the new macroeconomic projection in July, encouraging the MPC to cut rates by 25bp. They expect a further 50bp worth of cuts in Q4, when the MPC studies analyses of the ramifications of the 2026 budget bill. Millennium think that the risks are skewed towards larger and faster cuts this year.
- Pekao write that there were no significant new signals in the MPC statement and the panel still considers fiscal policy and administered prices to be the key risk factors. They think that the presser may confirm whether the expected 25bp rate cut will materialise in July.
- In PKO's view, the statement did not include any important information. The reinstatement of a mention of rates being conducive to the realisation of the inflation target could represent a change in the informal policy stance to neutral, or could be a mere justification of the decision to stand pat on rates. For now, they still expect the MPC to continue the rate-cutting cycle from July, and they see a risk of a faster termination of the cycle due to the rising risk of looser fiscal policy in the wake of the presidential election.
- Santander note that the statement did not feature any meaningful changes. They add that strong industrial output, wage and retail sales data supported the decision to stand pat on rates this month. They expect a 25bp cut in July and then another one in September, with inflation ending the year at +3.0% Y/Y. However, the outcome of the presidential election may result in a looser fiscal policy, reducing the room for further monetary easing.
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DUTCH T-BILL AUCTION RESULTS: 4/6-Month DTCs
May-06 09:40
| Type | 4-month DTC | 6-month DTC |
| Maturity | Aug 28, 2025 | Oct 30, 2025 |
| Amount | E1.94bln | E1.3bln |
| Target | E1.0-2.0bln | E1.0-2.0bln |
| Previous | E1.07bln | E1.09bln |
| Avg yield | 1.99% | 1.909% |
| Previous | 2.134% | 2.099% |
| Bid-to-cover | 2.23x | 2.21x |
| Previous | 1.21x | 1.14x |
| Previous date | Apr 07, 2025 | Apr 07, 2025 |
GERMAN AUCTION RESULTS: Another Low Bobl Bid-to-cover
May-06 09:38
That's the second consecutive weak auction for the 2.40% Apr-30 Bobl. Today's result saw a bid-to-cover ratio of 1.23x, below April's 1.38x and the five auction average of 1.89x.
- The bid-to-offer ratio of 0.95x was below 1.00x for the first time since October 2022.
- There was some reprieve that the lowest accepted price of 101.53 was above the 101.514 pre-auction mid price.
- The secondary price of the bond has since fallen to 101.497.
- Bobl futures have seen a fairly contained reaction since the results were published, now -7 ticks on the session at 119.17.
GILTS: Early Losses Intact, BoE Eyed Later This Week
May-06 09:34
Gilts hold the bulk of their early sell off, with no real spill over from the tepid recovery in lows seen in German equivalents as political uncertainty comes back to the fore in the largest EU economy.
- Gilts adjusted to the weakness seen in wider core global markets over the long UK weekend at the open.
- Futures have broken through Friday’s low (92.84) and the 20-day EMA (92.65), basing at 92.32 before a recovery to trade at ~92.45 last.
- Next support of note located at the April 17 low (91.73).
- Yields 1-5bp higher, curve steeper.
- 10s last ~4.56% after basing at 4.408% last week.
- Curves remain within multi-week ranges, 2s10s and 5s30s over 10bp off cycle highs.
- Gilt/Bunds ~4bp wider than Friday’s closing levels
- BoE-dated OIS little changed on the day, with the modest hawkish adjustment seen at the open unwound. A 25bp cut later this week is fully discounted, with 92bp of easing priced through year-end.
- SONIA futures are under a little more pressure, last little changed to -6.0
- We expect a 25bp cut this week, in line with market pricing and all sell-side views we have read.
- We have outlined some potential dovish tweaks to the Bank’s guidance verses in the statement, which could pave the way for consecutive rate cuts over the next 3 meetings.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.203 | -25.6 |
Jun-25 | 4.077 | -38.2 |
Aug-25 | 3.879 | -58.0 |
Sep-25 | 3.741 | -71.8 |
Nov-25 | 3.585 | -87.4 |
Dec-25 | 3.540 | -91.9 |
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