GILTS: OI Continues To Signal Low Conviction Markets Despite 'Credible' Budget
Dec-17 15:15
OI data points to fairly low conviction trade in gilt futures between December 9-16, with OI in the contract essentially unchanged across that window.
- Over a slightly longer horizon, post-Budget OI dynamics also fail to signal high conviction net long setting in the contract despite the market deeming Chancellor Reeves’ (relatively backloaded on the tightening side) fiscal plans to be credible.
- OI in the contract has only risen by ~7K or 0.6%, in the time since the Budget.
- Price action is also unconvincing in the time since, with the contract settling ~30 ticks below pre-Budget closing levels on Tuesday (today’s CPI-driven rally takes it ~30 ticks above the same closing level).
- Cash curve considerations are slightly more constructive over that window, with the 2s10s and 5s30s curves flattening, adding by the DMO’s ongoing skew away from long end issuance.
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GILTS: Holding Off Lows Ahead Of Key Risk Events
Nov-17 15:09
Gilts hold off lows registered over the past couple of sessions, although yields still print 5-13bp higher across the curve when compared to Thursday’s closing levels.
- Curve now sees a parallel ~3bp shift lower yields, early steepening unwound.
- Futures last +16 at 92.31 vs. highs of 92.43.
- Initial support of note located at 91.82, while bulls ultimately need to close Friday’s opening gap lower (~93.35) to start turning the technical tide back in their favour.
- As we noted previously, while long end swap spreads indicate increased fiscal risk premium being priced in after Chancellor Reeves’ apparent u-turn when it comes to income tax rate hikes, those spreads are still well off year-to-date lows.
- AXA Investment Managers halved exposure to gilts on Friday, according to a senior fund manager that spoke to RTRS.
- Elsewhere, OI data pointed to net short setting dominating in futures on Friday.
- SONIA futures flat to +3.0.
- BoE-dated OIS little changed to 2bp more dovish on the day, showing 18.5bp of easing for December, 26.5bp through February and 35bp through March.
- CPI data headlines the UK calendar this week (Wednesday), ahead of next week’s Budget (which will also be delivered on a Wednesday).
- Expect our full CPI preview to be published in due course.
MNI EXCLUSIVE: Poland's Deputy Climate Minister speaks on ETS2
Nov-17 15:02
Poland's Deputy Climate Minister Krzysztof Bolesta speaks about the economic cost of the EU's environmental targets.- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
MNI: US AUG CONSTRUCT SPENDING +0.2%
Nov-17 15:00
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