GILTS: Rallying Alongside Peers
{GB} GILTS: Gilts have rallied alongside core global FI markets in recent trade, we continue to search for an overt driver.
- Although demand at the latest OAT & gilt auctions was deemed solid to strong, the results don’t seem firm enough to account for the rally.
- Meanwhile, oil futures have moved away from session highs, but the pullback has is only modest at this stage.
- Futures have registered fresh session highs of 93.15 in recent trade.
- Next resistance of note located at the May 2 high (93.93).
- Yields 0.5-4.0bp lower, flattening bias on the curve
- 10s 1bp tighter vs. Bunds, after holding between 195-200bp in closing terms over the last 3 sessions.
- Last week’s yield lows intact across the curve, 10s last 4.49%, ~8bp off their ’25 base.
- GBP STIRs hold close to opening levels, with ~95bp of cuts priced through year-end and the next 25bp cut fully discounted come the end of tomorrow’s decision.
- Click for our full preview of that event.
- Expect macro and cross-market cues to dominate for much of today’s session, although signs of thawing Sino-U.S. tensions, reports of advances in UK-U.S. trade talks and Chinese macro policy easing have had little lasting impact thus far.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.201 | -25.9 |
Jun-25 | 4.070 | -38.9 |
Aug-25 | 3.871 | -58.9 |
Sep-25 | 3.731 | -72.9 |
Nov-25 | 3.572 | -88.7 |
Dec-25 | 3.513 | -94.6 |
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FOREX: Bear Cycle Grips Markets, AUDJPY at a New Low
- The bear cycle for equities continues to grip markets, with no end in sight for the aggressive risk sell-off. European equity markets have dropped a further 5% from the open Monday, with Asia-Pac markets particularly weak. Hong Kong's Hang Seng Index stepped lower by 13% into the close, entering a bear market and shrugging off any support garnered from Chinese state-run institutions openly buying in mainland equity markets.
- With European equities gapping lower at the open, it's no surprise to see JPY getting further support through Asia-Pac trade and maintaining that poise into early Europe. There is little sign that the risk-off trade has bottomed, evident in the new pullback low for AUDJPY at Y86.15 overnight, the lowest print since Mar'23's Y86.06, and 2022 before that.
- NOK/CHF trades similarly, defining both ends of the G10 FX table today, making for a convincing break through the 8.00 handle at the open as the cross becomes another strong indicator of risk.
- Focus turns to the imminent meeting of European leaders in Poland, at which the EU are said to be open to all options for retaliation against Trump's trade measures detailed last week. Options include a raise on levies for US goods headed to Europe, as well as more stringent regulation on big tech firms, and profits earned by US firms on the continent.
- The US President's schedule today consists of a meeting with the Israeli Prime Minister, but any comments concerning tariffs and the sensitivity of global markets will be carefully watched. Fed's Kugler is set to be speaking, commenting on inflation dynamics and the Phillips curve at 1530BST/1030ET.
EGBS: Bunds Off Session Highs As Equities Find Short-term Base
Bund futures have moved away from session highs as European equities find a short-term base, but a risk-off theme remains dominant following US officials’ tough weekend tariff rhetoric.
- Bunds are +125 ticks at 131.77, having pushed through Friday’s 131.48 high. Next resistance is the March 3 high at 132.04, clearance of which would expose key resistance at the Feb 28 high of 132.56.
- Initial support is Friday’s low at 129.78, but pullbacks short of the 20-day EMA at 129.02 will be considered corrective.
- Dovish repricing in ECB rate cut expectations (OIS now price 87bps of easing through year-end) helps EGB curves bull steepen, with Schatz yields down 17bps at typing at 1.657%.
- Sour risk sentiment sees 10-year EGB spreads to Bunds widen notably, with BTPs and GGBs underperforming Bunds by over 10bps on the session.
- This morning’s regional data has not been market moving, with hard data already stale given US tariff developments (German Feb IP weaker than expected, German trade Feb balance narrower than expected, Euro area Feb M/M retail sales weaker than expected).
- However, the more timely April Sentix indicator was much weaker-than-expected at -19.5 (vs -9.0 cons, -2.9 prior).
- Further developments in the tariff complex are the primary focus for the rest of the session.
COMMODITIES: Recent Pullback in Gold Considered Corrective For Now
The impulsive sell-off in WTI futures continues to accelerate and last week’s move down resulted in the breach of a number of important support levels. The break reinforces a bearish threat and, despite being in oversold territory, signals scope for a continuation of the bear leg. Sights are on $59.39 next, a Fibonacci projection (pierced). Initial resistance is seen at $64.85, the Mar 5 low and a recent breakout level. The trend condition in Gold remains bullish and the latest pull back - for now - appears corrective. Moving average studies are in a bull-mode position highlighting a dominant uptrend and positive market sentiment. Price has traded through the 20-day EMA. The next key support to watch lies at 2943.78, the 50-day EMA. A resumption of gains would refocus attention on $3196.2, a Fibonacci projection. The bull trigger is 3167.8, the Apr 3 high.
- WTI Crude down $2.54 or -4.1% at $59.5
- Natural Gas down $0.1 or -2.58% at $3.739
- Gold spot down $14.98 or -0.49% at $3023.57
- Copper down $7.65 or -1.74% at $433.5
- Silver up $0.47 or +1.58% at $30.0362
- Platinum down $1.6 or -0.17% at $920.82
