STIR: SONIA / Euribor Z6 Spread Could Narrow Further On Weak UK PMIs
Oct-22 10:10
Previously noted downside risks to the SONIA / Euribor Dec '26 spread are being realised this morning, following the soft UK September labour market data. The spread is currently down 9.5 ticks on the session at 146bps, narrowing the gap to the August 1 cycle closing lows of 145bps.
- A weak set of UK October flash PMIs on Friday could promote further narrowing in the spread. With ~60bps of cumulative BOE cuts priced across the next 12 months, there is still scope for additional dovish repricing.
- Meanwhile, a weaker-than-expected round of Eurozone flash PMIs is likely to exert greater influence on the distribution of implied ECB cuts (i.e. pulling cuts forward to December and March), rather than overall terminal rate expectations.
- Narrowing in the Z6 spread has supported a 0.3% bounce in EURGBP FX today. Spot is currently hovering just above 0.8700. The next area of interest on the topside is 0.8725, the October 10 and 17 high.
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BELGIUM AUCTION RESULTS: OLO Results
Sep-22 10:10
| 0.10% Jun-30 OLO | 3.10% Jun-35 OLO | 2.75% Apr-39 Green OLO | |
| ISIN | BE0000349580 | BE0000363722 | BE0000356650 |
| Amount | E933mln | E952mln | E726mln |
| Previous | E902mln | E1.208bln | E1.11bln |
| Avg yield | 2.525% | 3.248% | 3.595% |
| Previous | 2.444% | 3.185% | 3.389% |
| Bid-to-cover | 2.23x | 2.20x | 2.03x |
| Previous | 2.13x | 2.19x | 1.92x |
| Avg Price | 89.288 | 98.775 | 91.038 |
| Low Price | 89.26 | 98.76 | 91.01 |
| Pre-auction mid | 89.138 | 98.507 | 90.721 |
| Prev avg price | 89.109 | 99.285 | 92.976 |
| Prev low price | 89.09 | 99.26 | 92.93 |
| Prev mid-price | 88.973 | 99.023 | 92.670 |
| Previous date | 23-Jun-25 | 28-Jul-25 | 28-Apr-25 |
OUTLOOK: Price Signal Summary - Bear Threat In Oil Futures Remains Present
Sep-22 10:03
- On the commodity front, Gold remains in a clear bull cycle. A fresh all-time high once again, today, confirms a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows. The next objective is $3744.2, a 1.500 projection of the May 15 - Jun 16 - 30 price swing. Initial firm support lies at $3577.9, the 20-day EMA.
- In the oil space, the trend condition in WTI is unchanged - a bear cycle remains intact and the latest recovery is considered corrective. The pullback from the Sep 2 high highlights a possible reversal and the end of a corrective phase between Aug 13 - Sep 2. Initial resistance to watch is $66.03, the Sep 2 high. A stronger resumption of weakness would open $57.71, the May 30 low.
US TSY FUTURES: CFTC CoT Points to Reduction In Positioning Across Funds & AMs
Sep-22 09:59
Aggressive net long cover in US futures (~$9.6mln DV01) meant that asset managers reduced their curve-wide net long position by a little over $7mln on the week, with net long cover also seen in FV & TY futures, while there was net long setting in TU, UXY & WN futures. The cohort remains net long across all contracts.
- Leveraged funds lightened their curve-wide net short by ~$3.1mln DV01, with instances of net short cover (FV, TY & US) comfortably outweighing instances of net short setting (TU, UXY & WN). The cohort remains net short across the curve.
- Non-commercial accounts added to net shorts in the wings (TU & WN), while they covered some of their existing short position across the remainder of the curve. The cohort remains net short across all contracts. See table below for more details on the cohort’s positioning.
Source: MNI - Market News/CFTC/Bloomberg Finance L.P.
