STIR: SEB Wary Of Risk Of Hawkish Repricing Beyond Q126
Dec-05 10:49
In the immediate term SEB believe that there “is potential to reprice U.S. rates lower conditional on soft labor market data in Q1”.
- However, beyond Q1, they believe that “the risk is that the cutting cycle is more than fully priced & rates rebound on the business cycle picking up again”.
- SEB flag that “in countries where the cutting cycle is seen as done we have seen a narrative shift to anticipating the next hiking cycle and bear steepening of the curve - this is also likely to become a theme for the U.S. at some point in 2026”.
- They go on to highlight that “in theory SOFR steepeners between 2026-2028 look interesting as only modest hiking is priced but a risk is that the Fed delivers less cuts than priced which shifts the curve higher with limited steepening”.
- Instead, they flag payer structures that could capture either a re-steepening or a parallel shift of the curve as a better option, with a focus on ’28 structures via SOFR mid-curve plays.
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SONIA OPTIONS: Midcurve Call Spread vs Put Spread
Nov-05 10:49
0NU6 96.80/97.10cs vs 0NU6 96.30/96.00ps, bought the cs for -0.25 and flat in 7.5k.
US TSY FUTURES: TY Blocked
Nov-05 10:42
Latest block trade lodged at 10:24:46 London/05:24:46 NY:
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EGBS: Bund Futures Continue To Consolidate Above Key Support Zone
Nov-05 10:39
- The early risk-off inspired bid in Bund futures has faded, but RXZ5 remains above the 129.13 support area (aligning with the 50-day EMA and October 13 low). Futures are currently -2 ticks at 129.27, with solid results at today's 15-year Bund auction helping the contract away from session lows of 129.22.
- German yields are up to 1bp lower across the curve.
- Alongside the German supply, Italy held a E5bln buyback transaction.
- 10-year EGB spreads to Bunds are up to 1bp wider on the session, with global equity sentiment still relatively weak.
- Following upward revisions in France and Germany, and stronger-than-expected readings in Italy and Spain, the Eurozone services PMI was revised up to 53.0 (vs 52.6 flash, 51.3 prior). With the manufacturing PMI confirming flash estimates at 50.0 on Monday, this left the composite reading at a 29-month high of 52.5.
- There were marginal upward revisions to the ECB's latest forward-looking wage tracker relative to the September iteration, but the general conclusion that compensation pressures are expected to ease in the coming year remains intact.
- ECB’s Kocher is scheduled to speak on “Negative Rates and the Effective Lower Bound” later today.
