GILTS: Net Short Cover Seen During Recent Recovery Rally

Access Full Report Here

• President Donald Trump has “Executive Time” at 08:00 ET 13:00 BST and holds five closed-door policy meetings at 11:00 ET 16:00 BST.
• Congress returns today for a short legislative sprint ahead of the midterm elections on November 3. House Speaker Mike Johnson (R-LA) will bring the Senate-passed Russia sanctions legislation to the floor on Tuesday, despite Democratic concerns over expanding Trump’s unilateral tariff authority.
• Trump triggered another potential flashpoint with Kyiv, telling reporters that Ukraine is responsible for a rise in diesel prices.
• The House will also vote on a GOP-led bill aimed at curbing utility rate hikes due to data centres. However, Congress appears unlikely to take steps to regulate the industry, despite a growing consensus that the pace of frontier AI models poses catastrophic risks.
• Oil prices rose after new strikes on Saudi Arabian energy infrastructure. The Iran-backed Houthis appear to have consolidated control of territory adjacent to the Bab el-Mandeb strait in Yemen, including the strategic island of Perim.
• A first-of-its-kind summit between Iran and Gulf countries in Oman was postponed after a request from Saudi Arabia.
• Senate Republicans released another draft of the landmark crypto regulation bill, the Clarity Act. The revised text includes an ethics provision but it may not be enough to win over wavering Democrats
• Poll of the Day: Democrats are more motivated to vote against Trump than Republicans are to vote in favour of Trump. 

Full Article: US DAILY BRIEF

• The GBP 1Y1Y/2Y2Y OIS spread has pushed back below -10bp, as this month’s surge in the 1Y1Y to ~4.95% drives the belly of the forward curve firmly into negative territory, with room to extend lower.
• Despite the momentum behind this flattening move, a cushion of just over 15bp remains before the differential tests its March lows.
• With recent data and this week’s labour and CPI reports unlikely to alter expectations around the MPC’s reaction function, an unchanged 6-3 split is the most likely outcome on Thursday, but we flag that the primary wildcard sits with Lombardelli. If she votes for a hike or signals that her decision was "finely balanced," the 1Y1Y/2Y2Y spread may test levels closer to -30bp, especially against a backdrop where elevated energy prices continue to limit front-end relief.

Spain has announced it will be looking to sell a combined E5.0-6.0bln of the following at its auction this Thursday, September 17:

• the 0.70% Apr-32 Obli (ISIN: ES0000012K20)
• the 3.45% Oct-34 Obli (ISIN: ES0000012N35)
• the 3.40% Oct-36 Obli (ISIN: ES0000012S22)