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GILTS: Off Lows As Equities Falter & Wider Sell Off In Bonds Stalls
Gilts have rallied from early session lows as European equities pullback from highs and the recent sell off in wider core global FI markets stalls.
- Futures tested yesterday’s low at the open before recovering to trade +40 at 91.10 last.
- On the technical front, support is clustered at 90.62/53, while resistance comes in at 91.16.
- While the rally has removed some of the acute bearish pressure, our technical analyst has noted that a break of the support cluster would deepen the recent bearish move and negate a bullish technical theme.
- Yields are 2-4bp lower, curve is flatter.
- 2s10s 3bp above post-Budget closing lows, while 5s30s is last trading 121.5bp, narrowing in on the June closing low at 118.15bp.
- The GBP750mln tender of the 4.25% Jun-32 gilt passed smoothly, generating strong demand.
- SONIA futures flat to 4bp firmer, terminal rate pricing 3.42% vs. a recent range of 3.285-3.465%. SFIZ6 recovers after registering the lowest level seen since mid-October.
- BoE-dated OIS shows ~22bp of easing for December vs. 21bp early today. We still expect a cut at that meeting.
- BoE’s Ramsden, Lombardelli, Dhingra & Maan are due to appear in front of a TSC (14:15 London). We do not expect any meaningful changes in tone at the event.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.754 | -22.0 |
Feb-26 | 3.686 | -28.8 |
Mar-26 | 3.623 | -35.1 |
Apr-26 | 3.532 | -44.2 |
Jun-26 | 3.491 | -48.3 |
Jul-26 | 3.435 | -53.9 |
Sep-26 | 3.424 | -55.0 |
BELGIUM T-BILL AUCTION RESULTS: TCs
| Maturity | Mar 12, 2026 | Dec 10, 2026 |
| Amount | E1.47bln | E1.73bln |
| Target | E2.8-3.2bln | Shared |
| Previous | E1.003bln | E1.156bln |
| Avg yield | 1.964% | 2.111% |
| Previous | 1.969% | 2.048% |
| Bid-to-cover | 1.84x | 1.55x |
| Previous | 1.92x | 2.11x |
| Previous date | Dec 02, 2025 | Dec 02, 2025 |
EGBS: Recoveries In Bund Futures Considered Corrective For Now
Bund futures have moved away from multi-week lows this morning, currently +37 ticks at 127.66. Recoveries are still considered corrective for now, with initial resistance not seen till 128.08 (Dec 8 high). Volumes have been very healthy, seemingly reflecting a mix of views around whether the recent selloff can extend, or if a relief rally is more likely.
- 10-year Bund yields are down 2bps to 2.84%, after briefly reaching 2.88% this morning. The 2.90% figure presents the initial topside target, shielding the March 12 high of 2.94%.
- The German 10s30s curve is ~0.5bps steeper at ~60bps, after flattening around 5bps yesterday. The EUR 10s30s swaps curve is little changed at ~29bps. Given recent hawkish repricing in EUR rates has been primarily driven by the front-end, flattening further out the curve may represent unwinds of popular steepener positions related to the Dutch pension fund transition.
- 10-year EGB spreads to Bunds are up to 1bp wider on the session, with BTP/Bund spread back above 70bps. However, widening in the BTP/Bund spread has still been fairly contained considering the sharp uptick in EUR rates vol.
- In France, focus remains on this afternoon's National Assembly vote on the 2026 Social Security budget. The outcome remains very close to call.
- Ireland plans to issue E10-14bln of bonds with one syndication in 2026. This is a bit higher than expected, but there has so far been limited reaction in Irish bond markets.
- Today’s regional data calendar has been light, with some focus on US job openings data this afternoon ahead of tomorrow’s Fed decision.
