GILTS: Resistance Broken In Futures, Trend Support Broken In 10s, Curve Flattens
The rally stemming from yesterday’s German CPI data and ongoing geopolitical risks extends further.
- Futures have broken resistance at the November 27 top (91.93), trading as high as 92.05. Next level of upside interest noted at the November 12 high (92.31).
- Yields 2.5-7.5bp lower.
- 2-Year yields have registered the lowest level seen since August ’24.
- 10-Year yields have broken uptrend support drawn off the late ’21 lows (admittedly after several adjustments being made for similar breaches during ’25), which switches focus to the cluster of October and November lows (basing at 4.369%).
- The GBP4.25bln auction of the 4.125% Mar-31 gilt passed smoothly.
- BoE-dated OIS moves to price 43bp of easing through year-end vs. 40.5bp late yesterday.
- SONIA futures 0.5-5.5 firmer, strip flattens. SFIH6/Z6 moves to fresh cycle lows, nearing the May ’24 base (-27.5).
- The latest BoE DMP survey will be released tomorrow.
- As a reminder, we think that progress on headline CPI and official labour market data will not be sufficient to justify the next BoE rate cut, at least not in isolation. It is likely that the Bank will also need to see progress on inflation expectations data as well as further DMP prints and a non-adverse result from the Agents' Pay Survey.
Fig. 1: 10-Year Gilt Yield (%)
Source: MNI - Market News/Bloomberg Finance L.P.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Feb-26 | 3.712 | -1.3 |
Mar-26 | 3.619 | -10.6 |
Apr-26 | 3.509 | -21.6 |
Jun-26 | 3.441 | -28.5 |
Jul-26 | 3.368 | -35.8 |
Sep-26 | 3.335 | -39.1 |
Nov-26 | 3.300 | -42.5 |
Dec-26 | 3.293 | -43.2 |
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EGBS: 10-year Bund Yields Push Through 2.80% As Hawkish ECB Repricing Persists
10-year Bund yields have pushed through the 2.80% figure to trade at the highest since March, now up over 3bps today. Hawkish repricing at the front-end has pulled yields higher across the curve, following a Bloomberg interview with ECB’s Schnabel and a solid German IP reading. Recent momentum suggests risks remain skewed in favour for further upside in yields.
- The short-end driven nature of recent moves has allowed the German 5s30s curve to flatten away from multi-week highs, currently -1.3bps today at 101.4bps. On the domestic front, focus remains on Germany’s 2026 issuance plan, which we expect to be released next week.
- Bund futures are -40 ticks at 127.75, on track for a seventh consecutive negative session. A bear cycle remains intact, with next support at 127.57, a Fibonacci projection. Options flow across the curve has been clearly skewed towards further downside.
- 10-year EGB spreads to Bunds are biased up to 1bp wider, a function of fading ECB rate cut expectations and an uptick in EUR rates vol. The BTP/Bund spread nonetheless remains below 70bps.
- Schnabel noted that she was “rather comfortable” with market expectations that “the next rate move is going to be a hike, albeit not anytime soon”. Although not too surprising given her hawkish stance, the remarks are being interpreted as a further signal that another cut is unlikely, viewed alongside sticky (core) inflation data, improving PMIs and a stronger-than-expected Q3 compensation per employee reading.
- Meanwhile, German October industrial production was stronger-than-expected at 1.8% M/M (vs 0.3% cons and a downwardly revised 1.1% prior).
- This week’s Eurozone calendar is reasonably light, with broader global focus on Wednesday's FOMC decision.
SOFR OPTIONS: 0QH6 96.375/96.25/96.125 Put Fly Lifted
2 block trades lodged in recent trade:
- 0QH6 96.375/96.25/96.125 put fly 6K blocked in total at 0.5 vs. 96.895 (5% delta), CME email points to a buyer of the wings.
COMMODITIES: WTI Future Moving Average Studies in a Bear-Mode Position
Short-term gains in WTI futures appear corrective - for now. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend. A resumption of the bear leg would open the key support and the bear trigger at $55.99, the Oct 20 low. Clearance of this level would resume the downtrend. Key short-term resistance to watch is $61.84, the Oct 24 high. A clear break of this hurdle would signal scope for a stronger correction. The trend needle in Gold continues to point north. The bear phase between Oct 20 and 28 appears to have been a correction and note that the recovery since Oct 28 signals the end of that corrective cycle. Key support to watch lies at the 50-day EMA, at $4031.1. Clearance of this EMA would signal scope for a deeper retracement. Sights are on key resistance and the bull trigger at $4381.5, the Oct 20 high.
- WTI Crude down $0.4 or -0.67% at $59.67
- Natural Gas down $0.2 or -3.8% at $5.087
- Gold spot up $11.02 or +0.26% at $4208.61
- Copper down $0.65 or -0.12% at $545.5
- Silver up $0.09 or +0.15% at $58.4193
- Platinum up $15.99 or +0.97% at $1659.2
