UK DATA: PMI: Falling backlogs of work and employment, rising input costs
Aug-21 08:40
Highlights from the PMI press release focus on strong new business volumes but not enough high enough to stop backlogs of work falling while input costs are increasing and employment continuing to decline. With the BOE focused on inflation expectations, the reports of higher food costs in here will be concerning to the MPC:
- "New business volumes expanded at the strongest pace since October 2024."
- "Despite a sustained downturn in staffing levels and a renewed improvement in new order books, the latest survey data highlighted the fastest decline in backlogs of work for three months."
- "Employment was again a weak spot as total workforce numbers decreased for the eleventh month running and at a marked pace."
- "Input cost inflation meanwhile edged up to its highest since May. Survey respondents continued to note that suppliers had sought to pass on increased National Insurance costs. Higher payroll costs also resulted in another robust rise in prices charged by private sector firms in August, with service providers recording particularly strong inflationary pressures."
- "Some firms also commented on higher food prices and transportation bills. Higher freight costs were partly linked to longer shipping times for items sourced from Asia. Moreover, manufacturers recorded the sharpest downturn in supplier performance since December 2024 amid widespread reports of container freight delays due to disruptions at ports."
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RATES: ING Remain Bearish Long-end Rates, But Thin Liquidity Adds Volatility
Jul-22 08:33
ING remain bearish on longer-dated rates, but note that thinner summer liquidity could give rise to yield volatility in either direction:
- “Over the past few weeks, markets have largely treated tariff headlines as background noise, but with the August 1 deadline approaching, we may start to see more volatility”.
- “And with market liquidity thinning during the summer, any such moves may be amplified. The sharp decline in 30Y yields on Monday, for example, was difficult to justify from the news flow alone”.
- “The very long end of global yield curves will remain a source of volatility as the themes driving those moves are likely to linger. In Japan, there were elections over the weekend, but the fiscal outlook remains uncertain. Also, in the UK and numerous EU countries, government finances are at risk. Meanwhile, in the US, the independence of the Fed is being challenged"..."part of the rally in long-dated bonds on Monday may therefore be linked to headlines about Treasury Secretary Scott Bessent’s opposition to firing Fed Chair Jerome Powell".
- "All these drivers are unlikely to disappear overnight, which is a reason to remain more bearish on longer-dated rates”.
EURIBOR OPTIONS: Z5 Call Condor Seller
Jul-22 08:27
ERZ5 98.25/98.375/98.50/98.625 call condor, paper sells for 2.5 in 3.75k
GILT AUCTION PREVIEW: 1.125% Sep-35 index-linked gilt auction preview
Jul-22 08:21
- The DMO will kick off issuance for the week on Tuesday with GBP1.7bln nominal of the 1.125% Sep-35 linker on offer via auction.
- Linkers continue to remain in demand and we have not seen a conventional auction since August 2024 with a bid-to-cover below 3x.
- This on-the-run 10-year linker was launched in January for GBP1.5bln nominal and this will be the fifth auction (matching the auction size seen in June of GBP1.7bln nominal).
- We would expect another strong auction this week.
- The 1.125% Sep-35 linker will be on offer again on 19 August.
