STIR: RONIA spike: BOE Balance Sheet and PMRR in Focus (2/3)
Nov-07 07:13
- The size of the Bank's balance sheet sets the amount of available reserves so in times when the balance sheet is smaller there is greater demand for funding from other parts of the market (evidenced by the spike higher in RONIA).
- As we noted last week there is often volatility around large gilt redemptions of BOE holdings in funding markets, and we have seen spikes in RONIA at similar points around these. And as the balance sheet gets smaller and we approach the upper end of the Bank's estimate of PMRR (preferred minimum rate of reserves) this volatility will both increase and the RONIA-Bank Rate spread should increase.
- For now, however, we are still around GBP100bln above the top of the Bank's estimates of PMRR - which suggests that we won't move from an "excess" to more "ample" reserves level for around a year (or possibly longer if repo operation usage keeps increasing).
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EUROSTOXX50 TECHS: (Z5) Trend Needle Points North
Oct-08 07:11
- RES 4: 5777.41 1.382 proj of the Aug 1 - 22 - Sep 2 price swing
- RES 3: 5727.18 1.236 proj of the Aug 1 - 22 - Sep 2 price swing
- RES 2: 5700.00 Round number resistance
- RES 1: 5689.00 High Oct 2
- PRICE: 5619.00 @ 07:55 BST Oct 8
- SUP 1: 5615.00 Intraday low
- SUP 2: 5527.10 20-day EMA
- SUP 3: 5455.98 50-day EMA
- SUP 4: 5366.00 Low Sep 17
Eurostoxx 50 futures remain in a bull-mode condition and short-term weakness is considered corrective. The recent breach of key resistance at 5525.00, the Aug 22 high, confirms a resumption of the uptrend. Sights are on the 5700.00 handle next, with potential for a test of 5727.18 further out, a Fibonacci projection. MA studies are in a bull-mode position too, highlighting a dominant uptrend. Initial firm support is 5527.10, the 20-day EMA.
GERMAN DATA: August Manufacturing Sees Broad-Based Drop to Cycle Lows
Oct-08 07:09
- Industrial production in August was much weaker than expectations (-4.3% M/M vs -0.9% cons). Destatis mentions some one-offs for the particularly weak print but the drop to cycle lows remains. On a 3m/3m comparison, IP printed -1.3%.
- "In August 2025, production in industry excluding energy and construction was down 5.6% from July 2025 after seasonal and calendar adjustment. Within industry, decreases were reported in all three major groups". See chart below for an index comparison.
- "The negative development of production was particularly attributable to the sharp decrease seen in the automotive industry, Germany's largest industrial branch (-18.5% on the previous month). The marked decrease may be explained, at least in part, by the combination of annual plant closures for holidays and production changeovers. The development of production in the manufacture of machinery and equipment (-6.2%) continued to have a negative impact on the overall result, following the increase of 9.2% registered in July 2025 [eg base effects at play here]. The drop in output witnessed in the pharmaceutical industry (-10.3%) and in the manufacture of computer, electronic and optical products (-6.1%) also had a negative effect.", Destatis comments on drivers.
US TSY FUTURES: FV/US Flattener Blocked
Oct-08 07:07
Latest block trades lodged at 07:53:06 London/02:53:06 NY:
- FVZ5 6.1K lots blocked at 109-10.25, looks like a seller.
- USZ5 1.9K lots blocked at 116-29, looks like a buyer.
- Looks like a ~$270K DV01 FV/US flattener, cash 5s20s incrementally flatter (~0.5bp) since the block was lodged, last 97.8bp, operating comfortably within the 92.1-118.5bp closing range seen since late July.
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