US-RUSSIA: Putin-Witkoff Meeting Underway

Gilts trade away from session highs alongside wider core FI, as the largely CPI-driven bid fades.

• Futures have unwound more than half of the early rally, last trading at ~91.20 vs. session highs of 91.58.
• As mentioned previously, our technical analyst notes that the short-term outlook for the contract remains bearish.
• Yesterday’s low (90.93) protects key support at the Mar 6 low (90.71).
• Key short-term resistance has been defined at 93.01, the Mar 20 high.
• Yields little changed to 5bp lower, 4-5bp off session lows.
• Curve holds steeper on the back of the dovish BoE repricing that followed the CPI data.
• Outperformance vs. Bunds holds, but spreads are back from session tights. 10-Year UK/German spread last ~193bp.
• Long end swap spreads biased tighter, perhaps reflecting profit taking ahead of the Spring Statement in light of the recent widening.
• ~46bp of BoE cuts priced through year-end vs. ~40bp at the close yesterday and ~48bp at one point today
• Our full preview of the Spring Statement is here.

• In FX, the recent move down in EURUSD is considered corrective and the trend condition is unchanged - it remains bullish. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.0961 next, the 76.4% retracement of the Sep 25 ‘24 - Feb 3 bear leg. Clearance of this level would open 1.1040, the Oct 4 ‘24 high. First support to watch is 1.0763, the 20-day EMA.
• The trend structure in GBPUSD remains bullish and the latest shallow pullback appears corrective. Moving average studies are in a bull-mode position and this highlights a dominant uptrend. A resumption of gains would pave the way for a climb towards 1.3048, the Nov 6 2024 high. Initial firm support to watch is 1.2869, the 20-day EMA. Clearance of this level would signal scope for a deeper retracement towards the 50-day EMA, at 1.2731.
• USDJPY continues to trade closer to its recent highs. The primary trend direction is down and recent gains are considered corrective. Resistance to watch is 150.96, the 50-day EMA. A clear break of this EMA would signal scope for a stronger rally. For bears, a resumption of weakness would refocus sights on key support and the bear trigger at 146.54, the Mar 11 low. Clearance of this level would resume the downtrend. First support to watch is 148.18, the Mar 20 low.

• MBA composite mortgage applications drifted 2% lower last week (sa), building on the -6% the week prior that chipped away at a 34% two-week increase before that.
• Refis have led the modest pullback (-5% after -13% following 59%) whilst new purchase applications have largely paused (0.7% after 0.1% following 17%).
• The 30Y conforming rate inched 1bp lower to 6.71%, broadly consolidating around the 6.7% level for the past four weeks now having eased from a recent high of 7.09% in early January. It's a move that stoked a relatively modest uplift in activity when looking at broader trends.