GILTS: Off Highs, Curve Flatter
Oct-08 09:35
Gilts are off session highs.
- Early cross-market support came from soft German data and some optimism surrounding the avoidance of fresh elections in France, but that move has stalled.
- The ONS has detected errors in the PSNB data, meaning that the UK’s fiscal situation is marginally less downbeat than was previously envisaged, which has probably driven some gilt curve flattening (although the discrepancies are quite minor in the grander scheme of things).
- 10-Year gilts underperform vs. Bunds, spread 1bp wider on the day at ~202bp.
- Futures +18 at 90.72.
- Bears remain in technical control, initial support and resistance located at 90.26 & 91.08, respectively.
- Yields 1bp higher to 1bp lower, 2s10s ~5bp off September closing lows, while 5s30s is ~2bp off its September closing low.
- The GBP5bln auction of the new 4.00% May-29 gilt passed smoothly enough, with the cover ratio comparable to the recent averages of auctions of surrounding lines and a sub-1bp tail generated.
- GBP STIRs little changed on the day, showing ~5bp of easing through year-end. We continue to believe that markets are underestimating the chances of a Q4 rate cut.
- Comments from BoE chief economist Pill are due this afternoon (16:00 London).
- Pill will speak at the Maxwell Fry Annual Lecture at the University of Birmingham. We do not know the subject of the address.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Nov-25 | 3.959 | -0.8 |
Dec-25 | 3.920 | -4.7 |
Feb-26 | 3.816 | -15.2 |
Mar-26 | 3.785 | -18.2 |
Apr-26 | 3.710 | -25.7 |
Jun-26 | 3.687 | -28.0 |
Jul-26 | 3.639 | -32.8 |
Sep-26 | 3.628 | -33.9 |
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GERMAN T-BILL AUCTION RESULTS: 11-month Bubill
Sep-08 09:32
| Type | 11-month Bubill |
| Maturity | Aug 19, 2026 |
| Allotted | E1.375bln |
| Previous | E1.31bln |
| Total sold | E1.5bln |
| Target | E1.5bln |
| Avg yield | 1.908% |
| Previous | 1.891% |
| Bid-to-cover | 3.81x |
| Previous | 4.31x |
| Bid-to-offer | 3.49x |
| Previous | 3.77x |
| Previous date | Aug 11, 2025 |
FOREX: JPY Weaker as Ishiba Resignation Opens Up Uncertainty
Sep-08 09:26
- JPY remains weaker against all others early Monday. For much of last week, markets were speculating over the chances of Ishiba in a potential LDP vote to
bring forward a party leadership election, but the PM has gotten ahead of any further uncertainty by announcing his resignation. So why is JPY weaker? Thatcherite MP Sanae Takaichi is a front-runner among many opinion polls - and also ran against Ishiba in the last leadership race, triggering JPY vol. While politically conservative, she's made clear her preference for easy monetary policy and a bigger role for fiscal spending - reminiscent of the Abenomics policy set from 2012 - 2020. - EUR/JPY rallied to 173.91 overnight, but has stalled since. 173.97 remains the bull trigger here, clearance of which puts the rate at the best levels since last year. AUD, NZD extend their recent spell of strength, with NZD/USD just below Friday's highs of 0.5918. A rally through here and 0.5927 would break downtrendline resistance drawn off the early July highs.
- Firmer equity sentiment since the open has allowed the likes of AUD and NZD to outperform in G10 currency markets on Monday, capitalising on the bearish dollar sentiment following the softer-than-expected US employment report. As a result, AUDUSD (+0.41%) has traded within one pip of the Friday highs and the latest price action has helped the pair consolidate above short-term resistance of 0.6569, which was cleared last week. This places the market’s interest back on the 0.66 handle, of which we have only had one daily close above since the US election related volatility back in November 2024.
- Focus this week remains on the US inflation picture, with PPI and CPI prints due on Wednesday and Thursday respectively. With a September Fed rate cut now all but assured - a weaker price turnout this week could trigger further speculation over an easing step of over 25bps at next week's committee meeting.
FOREX: Aussie Benefitting from Post-Payrolls Backdrop, AUDJPY Resistance Nears
Sep-08 09:26
- Firmer equity sentiment since the open has allowed the likes of AUD and NZD to outperform in G10 currency markets on Monday, capitalising on the bearish dollar sentiment following the softer-than-expected US employment report.
- As a result, AUDUSD (+0.41%) has traded within one pip of the Friday highs and the latest price action has helped the pair consolidate above short-term resistance of 0.6569, which was cleared last week. This places the market’s interest back on the 0.66 handle, of which we have only had one daily close above since the US election related volatility back in November 2024.
- Key resistance and the bull trigger are located at 0.6625 (Jul 24 high), of which a breach would strengthen the underlying bullish trend. The next targets for the move would be 0.6688 (Nov 07 high) and 0.6700, the 76.4% retracement of the Oct-Apr selloff.
- Japanese politics has also boosted AUDJPY (shown below) by a solid 0.62% today, with the cross hovering once again below some important chart levels. A break of 97.43 would place the cross at the highest levels since January. The 2025 highs come in at 99.17.
Source: Bloomberg Finance L.P. / MNI
