GILTS: Off Early Highs, Curve A Little flatter Again
Sep-05 09:36
Gilts continue to trade below early session highs, taking cues from core global FI peers, with tight ranges in play ahead of the impending U.S. NFP release.
- Futures traded as high as 90.87, before moving back to and stabilising around 90.70.
- The Aug 28 & 29 highs (90.84) were pierced during the opening rally. Fresh extension higher would target key near-term resistance at the August 18 high (91.24).
- A break of the latter would increase the risk to the bearish technical cycle, with the recent bounce reflecting an unwind of oversold conditions at this stage.
- Yields are flat to 1.5bp lower, curve flatter.
- 10s and 30s are ~20bp off this week’s highs, although their uptrends remain intact.
- Similarly, steepening technical trends in 2s10s and 5s30s remain intact, despite the pullback from this week’s highs.
- GBP STIRs little changed vs. late Thursday levels.
- Just under 10bp of BoE easing showing through year-end, SONIA futures -0.5 to +2.5.
- Firmer-than-expected UK retail sales data was seen pre-open, although the upside surprise was driven by revisions/corrections to the series. The data won’t change the BoE outlook.
- Fiscal worries and headwinds for Deputy PM Rayner continue to headline UK news flow.
- The DMO revealed that the Thursday 11 Sep PGT will be the first that will see multiple lines offered.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.974 | +0.7 |
Nov-25 | 3.927 | -4.0 |
Dec-25 | 3.877 | -9.0 |
Feb-26 | 3.776 | -19.1 |
Mar-26 | 3.738 | -22.9 |
Apr-26 | 3.668 | -29.9 |
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GERMAN AUCTION RESULTS: 1.00% May-38 / 3.25% Jul-42 Bunds
Aug-06 09:34
| 1.00% May-38 Bund | 3.25% Jul-42 Bund | |
| ISIN | DE0001102598 | DE0001135432 |
| Total sold | E1.5bln | E1bln |
| Allotted | E1.262bln | E782mln |
| Previous | E1.398bln | E407mln |
| Avg yield | 2.86% | 3.00% |
| Previous | 2.80% | 2.65% |
| Bid-to-offer | 1.55x | 2.28x |
| Previous | 2.20x | 2.48x |
| Bid-to-cover | 1.84x | 2.91x |
| Previous | 2.36x | 3.05x |
| Avg Price | 80.32 | 103.25 |
| Low Price | 80.31 | 103.25 |
| Pre-auction mid | 80.266 | 103.200 |
| Prev avg price | 80.69 | 108.62 |
| Prev low price | 80.68 | 108.55 |
| Prev mid-price | 80.646 | 108.542 |
| Previous date | 28-May-25 | 28-Feb-24 |
EGBS: German Curve Bear Steepens Ahead Of Bund Supply
Aug-06 09:25
The German curve has bear steeped ahead of this morning’s 15-year Bund auction, with Schatz yields little changed at 1.91% and 30-year yields up 3bps at 3.17%. The 5s30s curve has moved away from Thursday’s 86.8bp multi-week low, now back at 94bps.
- Bund futures are biased lower, albeit on light volumes, but a bullish technical theme remains intact. Futures are currently -17 ticks at 130.18, still above the 50-day EMA.
- 10-year EGB spreads to Bunds are up to 0.5bps wider today. The 10-year BTP/OAT spread has taken another leg lower since the end of July, now just below 14bps for the tightest since 2007.
- This morning’s regional data has not been market moving. German factory orders were skewed lower by the volatile large-scale orders category (-1.0% M/M vs 1.1% cons, an upwardly revised -0.8% prior), while Italian industrial production was stronger-than-expected at 0.2% M/M (vs -0.2% cons, -0.8% prior). French private payrolls growth remains tepid, while Eurozone retail sales were in line at 0.3% M/M.
GILTS: Early Bear Steepening Holds, Global Supply & Crude Eyed
Aug-06 09:24
Gilts hold lower with the presence of global supply and an uptick in crude oil weighing.
- Lows of 92.36 seen in futures so far, contract last -31 at 92.44.
- Bears will look to force a break of Monday’s low (92.24) to expose the 20-day EMA (91.86), as they look to quell some of the recent bullish momentum. Initial resistance at yesterday’s high (92.84).
- Yields 0.5-3.0bp higher, curve bear steepens.
- 2s10s back above 70bp after the first close below since early July, while 5s30s remains pinned around 140bp.
- SONIA futures +1.0 to -3.5, strip twist steepens.
- BoE-dated OIS showing ~49bp of easing through year-end, with over 90% odds of a cut priced for tomorrow.
- Click for our full preview of tomorrow’s decision.
- NIESR’s warning on the UK fiscal situation/need for meaningful tax hikes, has garnered most of the interest when it comes to local news developments.
- Our political risk team notes that with Reform UK benefiting from significant public anger at Labour's handling of immigration and crime, breaking its manifesto promises on tax could further damage the gov'ts standing ahead of elections to the Scottish and Welsh parliaments and English local councils in 2026.
- Little of note on the UK macro calendar today, which will leave focus on cross-market matters (Fed leadership, global trade etc.) for much of the day.
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