STIR: RONIA moved back to more "normal" range yesterday
Nov-14 12:06
- With yesterday's STR and Tuesday's ILTR (that also settled yesterday) bringing reserve balances up to a record GBP152.9bln, yesterday's RONIA moved lower by just over 3bp back down to 4.063% - a more "normal" spread to Bank Rate and down from the 4.159% seen last Friday.
- This morning has seen some big moves in gilts, if this sees a clear out of some of the long gilt positions established after last week's BOE meeting, there could be some scopes for some more marginal moves lower in RONIA in the coming couple of days.
- Outside of the repo operations, the BOE balance sheet has now settled down a little as TFSME repayments have been made for the foreseeable future and there are no big gilt redemptions due until the end of January (although there is still one more APF sales operation on 24 November).
- Reserves balances fell to GBP643.3bln on Wednesday (ahead of this week's repo ops) from GBP651.3bln last week and GBP630.2bln the week before (which saw the bigger spike in RONIA).
- With this week's repo operations we project that reserve balances will be back to mid-October levels around GBP655bln in next week's balance sheet update.
- Yesterday we published a note on UK funding markets - that is available here.
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US TSYS: Repo Reference Rates
Oct-15 12:03
- Secured Overnight Financing Rate (SOFR): 4.19% (+0.04), volume: $2.932T
- Broad General Collateral Rate (BGCR): 4.16% (+0.04), volume: $1.144T
- Tri-Party General Collateral Rate (TCR): 4.16% (+0.04), volume: $1.113T
- (rate, volume levels reflect prior session)
GILT PAOF RESULTS: The PAOF for the 0.125% Aug-31 Linker was not taken up.
Oct-15 12:02
- GBP375.0mln have been available.
- This leaves GBP14.254bln of the linker in issue.
EGBS: OAT Futures Narrowing Gap To Resistance; French Risks Still Present
Oct-15 11:57
OAT futures are slowly narrowing the gap to resistance at 123.23 (equates to the 3.35% 10-year yield level), currently +47 ticks at 123.16. Regional headline flow remains fairly limited, with yesterday’s pullback in near-term French political risks driving the intraday bid in EGBs.
Although French PM Lecornu now looks likely to survive tomorrow’s censure votes, France’s political/fiscal outlook still faces risks.
- Socialist leader Faure has noted that "I didn't buy the budget, I'm going to fight it tooth and nail from now on, and we'll see who on the right and the left gets satisfaction article by article."
- Lecornu will have to tread a fine line in budget negotiations to avoid losing implicit support of the Socialists and/or the LR. Some Socialist MPs (e.g. Paul Christophle) are still planning to censure the Government despite their Party’s intstructions.
- Additional concessions to the Socialists would further impede fiscal consolidation efforts, and likely push the expected 2026 deficit closer to 5.0%, rather than the 4.7% currently targeted.
That said, today’ s strength in OAT futures is continuing to support Bunds. Bund futures are once again testing the 130.00 figure (+29 ticks at 129.97), which shields resistance at 130.05 (76.4% retracement of the Jun 13 - Sep 3 bear leg).
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