BONDS: Schatz Swap related trade vs Bund
Feb-09 09:21
- Regarding the Large earlier Swap trade:DUH4 11.2k at 105.595, this was done against Bund, perfectly weighted:
- RXH4 1.87k at 133.37.
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CROSS ASSET: Core Govies edge to session highs
Jan-10 09:19
- Schatz was bought in 5.6k, also some receiving interest has pushed the contract off its low.
- Swap related trade saw DUH4 5.5k at 106.08.
- Italian BTP leads Govies higher, with next initial resistance coming at 118.49.
- The contract saw its second largest traded volume Yesterday for the March contract, which was dominated by hedging as the Italian Syndication Priced.
- Bund lags somewhat with the upside limited ahead of the heavy Bund Auction.
- US Treasuries on the follow, sees buyer of 3k TYH4, 2.5k FVH4 and 1k USH4, led by EGBs.
- DXY test session low on the back of the Equity and Treasury move.
GILTS: TD Securities Recommend 5s30s Flatteners
Jan-10 09:14
TD Securities write “steepening has been the consistent theme across curves since the December pivot from the Fed. Even though we favour a structural steepening view for 5s30s Gilt curve, the move is more likely to come closer to the March Budget. For now, we favour a tactical flattening bias.”
- “UK front-end is currently pricing around 125bps in rate cuts in 2024. We doubt that the BoE will entertain additional rate cut pricing with wage service inflation still being sticky. This limits further performance of the front-end for now.”
- “Following the upcoming 30y deal, the general skew of supply will shift towards the short/medium part of the curve. The DMO primarily has 3 more long auctions remaining for the fiscal year as compared to 10 auctions skewed to the shorts/mediums. QT skew has also reduced for longs in Q1.”
- “Duration benefits from £31bn in redemptions in end of January.”
- “5s30s curve or 30y outright both look attractive on a cross market basis.”
- “We see flattening drivers more prominent for now in the Gilt curve. This in particular holds in absence of big data or supply surprises holding steepeners can be rather punitive on carry.”
- They recommended entry at 66bp, targeting a move to 40bp, with a stop set at 82bp.
GILTS: Syndication Announcement Aids Widening
Jan-10 09:10
The announcement of the syndication of a new Jul-54 gilt line (for w/c 22 Jan) promote some widening pressure for gilts vs. core global peers this morning. 10-Year spreads to Bunds are ~1bp wider on the day, with a similar degree of widening noted vs. U.S. Tsys. A reminder that the DMO will also come to market with 3-year paper later today.
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