GILTS: Off Lows Alongside Bunds, Questions Remain On BoE Trajectory
Dec-18 15:34
Recovery from lows in EGBs surrounding the ECB provides some spill over support for gilts, pushing futures back to 91.30 from session lows of 90.99.
- Meaningful technical parameters in that contract remain located at 90.50 and 91.93.
- Yields 3bp higher to 1bp lower, curve twist flattens.
- Gilt/Bunds ~2bp wider on the day at 163p after piercing 160bp earlier today.
- Benchmark yields stick within multi-week ranges despite the initial hawkish post-BoE repricing.
- SONIA futures flat to -4.5, late white pack contracts lead the move lower. SFIZ6 remains closer to month-to-date highs than month-to-date lows, largely owing to yesterday’s soft CPI release.
- End of ’26 BoE-dated OIS pricing shows ~38.5bp of cuts (assuming full transmission of today’s easing).
- A reminder that markets reacted to a lack of dovish surprise in the 5-4 vote split (following yesterday’s soft CPI reading) and the BoE’s choice to add a sentence to the guidance paragraphs, noting that further easing would become a "closer call" (it was previously in the MPR and this was a non-MPR meeting).
- Also, there was nothing to guide towards a cut at the next BoE decision. but equally there is time between now and then for speeches to communicate another cut could be coming.
- It's hard to know if this really raises the bar to further cuts or merely is to communicate that February is not nailed on if data come broadly in line with expectations.
- Markets price 90% odds of a cut come the end of the April meeting, with a cut more than fully discounted through June.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILT AUCTION PREVIEW: On offer next week
Nov-18 15:33
The DMO has announced it will be looking to sell GBP4.5bln of the 4.125% Mar-31 Gilt (ISIN: GB00BVP99673) at its auction next Tuesday, November 25.
US TSY FUTURES: BLOCK: Large Dec'25 5Y/30Y Ultra Flattener
Nov-18 15:26
Large flattener blocked/crossed at 1008:21ET:
- -20,000 FVZ5 109-12.75, sell through 109-13.25 post time bid (DV01 $855k) vs
- +2,500 WNZ5 120-12, buy through 120-11 post time offer (DV01 $465k)
US: CBO's Swagel To Provide Testimony To Congress Shortly
Nov-18 15:16
The Director of the nonpartisan Congressional Budget Office, Phillip Swagel, is shortly due to provide testimony to the House Budget Committee. LIVESTREAM
- Politico notes, “The oversight hearing will be the first chance GOP lawmakers have to air their grievances over the agency’s analysis of their party’s megabill [the so-called One Big Beautiful Bill] since the legislation was enacted in July.”
- The Associated Press reported in September that “Trump’s sweeping tariffs plan has posed challenges to the CBO’s standard models for assessing trade. So far, the CBO estimates the tariffs could reduce the national deficit by $4 trillion over the next decade, helping to offset the deficit increases it projects will result from the Republicans’ big bill passed this year. “It’s a huge impact,” Swagel said.”
- Rep. Lloyd Smucker (R-PA), who is hoping to succeed retiring Rep. Jodey Arrington (R-TX) as Budget chair, told Politico: “There’s a lot of models or algorithms that go into how they come up with the numbers. And I think the more that can be open and transparent to everyone, the better we can understand how they're reaching their conclusions.”
