OIL: Shandong Teapot Inventory Rate Rises on Week: OilChem

Gilt futures have fully unwound early fiscal-data induced weakness, now +5 tick at 91.83. Gilts were already moving away from session lows by mid-morning, but a broader bid in Bunds and TY futures appears to have helped the move extend. Initial firm resistance remains the 20-day EMA at 91.97. Failure to push through this level would keep a bear cycle intact.

• Front-end Gilt yields are now lower on the session, with 2-year yields down 1.5bps at 3.85%.
• As expected, BOE Governor Bailey did not touch on monetary policy matters in today’s TSC hearing on the latest Financial Stability Report. However, he did note that “It would not be sensible” for the Government to overhaul the UK’s bank ring-fencing regime.
• SONIA futures are flat to +3.0 ticks through the blues, with the reds leading the rally. SONIAs now outperform Euribor counterparts intraday, with the SFI/ER H6 spread now down 1.5 ticks at 180.5.

+29,000 TYU5 112 calls, 27 vs. 111-07/0.31% - total volume near 60k 

The Philadelphia Fed's Nonmanufacturing Business Outlook Survey continued to show improvement in July, though cost pressures remained elevated.

• The regional current general activity index rose to a 6-month high -10.3 from -25.0 prior. This was the 3rd consecutive improvement since bottoming at -42.7 in April amid tariff policy concerns.
• Even more impressively, the index for current general activity at the firm level increased to 10.2 from -17.3, the first positive reading since January and the highest outright since October 2024.
• The regional question asks respondents what their assessment if of general business activity for the region, while the latter asks for their assessment of activity for their own firm. Throughout the tariff episode, firms have been much more positive about their situation than they have been on the regional picture.
• The subindices were strong: new orders rose to 9.7 from -20.1; revenues 11.8 from 3.4; full-time permanent employment 4.1 from -2.1, albeit there were some pullbacks in capex and part-time employment.
• Future assessments were steadier, with the 6-month regional outlook at -3.9 from -8.2 prior, and firm-level ticking lower to 11.7 from 12.3.
• That said, price pressures increased: current paid ticked up to a 3-month high 32.5 from 29.7, and prices received jumped to 12.4 from 2.2, marking a 7-month high.
• These results mirror those seen in the NY Fed's Empire services survey: price pressures remaining elevated vs 2024 but not nearly as pronounced as for manufacturers.