GILTS: Recovering From Lows
Gilts sold off on the open, with ongoing fiscal worry and some questions surrounding the future of Chancellor Reeves continuing to add weight.
- That was before a recovery in wider core global FI markets (note that U.S. 30s failed to break above 5.00%) provided support.
- Futures broke yesterday’s low (89.60) and Fibonacci support (89.46), basing at 89.36 before recovering to unchanged levels (~89.75). Bears remain in technical control, initial support and resistance of note now 89.22 & 90.16.
- Yields flat to 2bp lower on the day.
- 10s trade above 4.80%. January highs (4.921%) present the next upside target.
- 30-Year yields hit the highest level since the late ‘90s (5.748%) before the pullback. The 1.236 Fibonacci projection of the Jun 13-Jul 18-Aug 5 price swing (5.74%) was pierced. The next upside projection lies at 5.79%.
- Note that the Treasury has confirmed that the Budget will be released on 26 November, with Chancellor Reeves stressing that she doesn’t think the UK economy is broken.
- Final UK services PMI data was revised upwards.
- BoE-dated OIS shows ~9bp of cuts through Dec, little changed on the day. We continue to believe that the November meeting is much more “live” than the ~4bp priced into the market at present.
- SONIA futures flat to +1.0.
- BoE’s Bailey, Lombardelli, Taylor & Greene will appear in front of the Treasury Select Committee this afternoon.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.973 | +0.6 |
Nov-25 | 3.923 | -4.3 |
Dec-25 | 3.879 | -8.8 |
Feb-26 | 3.785 | -18.2 |
Mar-26 | 3.750 | -21.7 |
Apr-26 | 3.685 | -28.2 |
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BONDS: Off Lows As Early Sell Off Stalls
German and UK yields generally tick higher vs. Friday’s close, taking cues from the U.S., before weakness in crude oil provides some counter.
- Weakness in Treasuries was perhaps linked to suggestions that U.S. President Trump can ultimately have little influence on the BLS data, despite the recent & incoming personnel changes (see our exclusive: Ex-Chief Says BLS Can Withstand Trump Pressure).
- An uptick in equity futures also weighs on bonds, with the above and Trump’s suggestions that he will likely leave Fed Chair Powell in post helping soothe risk appetite after Friday’s sell off.
- Bund futures as low as 129.50 before a recovery to 129.80, Initial support at the July 25 low and bear trigger (128.84) remains untouched,
- German yields flat to 2bp higher, curve steeper. 5s30s back towards 95 vs. closing cycle highs of 98.7bp.
- EGB spreads to Bunds little changed to ~2bp tighter, with the bounce in equities helping promote compression for the periphery (BTPs outperform, after 2bp tighter on the day) after Friday’s risk-off session.
- Gilt yields see a more parallel 1-2bp shift higher. Futures base around 91.25 before a recovery to 92.40. Initial support at the 20-day EMA (91.86).
- Modest hawkish adjustments in EUR & GBP STIRs, but both show a broadly unchanged picture, leaning towards 1 further ECB cut this cycle and 50bp or so of BoE easing through year-end (a BoE cut on Thursday remains over 90% discounted).
- U.S. durable goods (final) and factory orders highlights the macro calendar today.
COMMODITIES: WTI Futures Pressured into Friday Close
WTI futures slipped into the Friday close, erasing the gains posted earlier in the week. Support to watch is the 50-day EMA, at $65.37. The average has been pierced, a clear break of it would expose $58.17, the May 30 low. Gold benefited from the soft NFP print on Friday, returning prices toward the top-end of the recent range. This supports the view that short-term weakness is corrective - for now - and a bull cycle that started Jun 30 remains intact.
- WTI Crude down $0.71 or -1.05% at $66.59
- Natural Gas down $0.02 or -0.65% at $3.062
- Gold spot down $4.28 or -0.13% at $3360.5
- Copper up $3.25 or +0.73% at $446.65
- Silver up $0.28 or +0.76% at $37.332
- Platinum up $1.66 or +0.13% at $1320.97
EQUITIES: ESA Clears First Notable Support Post-NFP
E-mini S&P sold off sharply Friday on the back of the soft NFP print - pushing prices through mid-July lows in the process. This puts price well clear of support at the 20-day EMA, at 6336.64, signaling scope for a deeper retracement toward the 50-day EMA. The trend condition in Eurostoxx 50 futures faltered Friday, with short-term weakness resulting in a break of the bear trigger. Having shown below 5194.00, the Jun 23 low, the April 30 hi/lo range at 5078-5138 becomes the area of downside interest.
- Japan's NIKKEI closed lower by 508.9 pts or -1.25% at 40290.7 and the TOPIX ended 32.45 pts lower or -1.1% at 2916.2.
Elsewhere, in China the SHANGHAI closed higher by 23.357 pts or +0.66% at 3583.309 and the HANG SENG ended 225.64 pts higher or +0.92% at 24733.45. - Across Europe, Germany's DAX trades higher by 297.24 pts or +1.27% at 23725.7, FTSE 100 higher by 43.72 pts or +0.48% at 9113.57, CAC 40 up 69.38 pts or +0.92% at 7615.97 and Euro Stoxx 50 up 63.69 pts or +1.23% at 5229.56.
- Dow Jones mini up 304 pts or +0.7% at 44014, S&P 500 mini up 42.75 pts or +0.68% at 6307.5, NASDAQ mini up 176 pts or +0.77% at 23060.
