GILTS: Steepening Extends, Bears Eye Next Support
Dec-19 15:10
The move to the downside has stalled a little.
- Spillovers from wider core global FI markets still eyed, as Bund yields fail to push above a key level, while there has been little reaction to modest hawkish repricing in the U.S. following comments from NY Fed President Williams.
- Gilt futures have traded as low as 90.80, with next support at this week’s low (90.50). Contract last -52 at 90.88.
- Yields flat to 5bp higher, this morning’s steepening theme has extended, albeit with month-to-date highs untested in benchmark yields.
- 2s10s is set for the highest close of December at current levels (77.9bp). The next upside target is located at the pre-Budget November closing high (79.5bp).
- Gilt/Bunds little changed at 163.5bp after yesterday’s failed break of 160bp. There hasn’t been a sub-160bp close in the spread since July ’24.
- BoE-dated OIS prices ~37bp of easing for ’26, next 25bp move not fully discounted until the June MPC after the hawkish reaction to yesterday’s BoE decision.
- SONIA futures flat to -3.5.
- We have flagged the potential for further downside in the SONIA/Euribor Dec ’26 spread in the new year, based on relative central bank outlooks.
- Comments from BoE Governor Bailey failed to impact markets earlier today, generally reaffirming knowns/widely discussed themes.
- The BoE will issue its APF sale schedule later today (16:30).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Rate Cut-Adjusted SONIA (bp) |
Feb-26 | 3.708 | -1.7 |
Mar-26 | 3.628 | -9.7 |
Apr-26 | 3.519 | -20.6 |
Jun-26 | 3.457 | -26.8 |
Jul-26 | 3.391 | -33.4 |
Sep-26 | 3.371 | -35.4 |
Nov-26 | 3.350 | -37.5 |
Dec-26 | 3.354 | -37.1 |
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PIPELINE: Corporate Bond Update - No Jumbos Today
Nov-19 15:07
- Date $MM Issuer (Priced *, Launch #)
- 11/19 $Benchmark Avalon Bay 5Y +95a
- 11/19 $500M VSP Optical WNG 10Y +170
- 11/19 $Benchmark Element Fleet 5Y +125a
- 11/19 $Benchmark SMBC Aviation 10Y +145a
- 11/19 $500M FIBRA Prologis WNG 10Y +170a
- 11/19 $Benchmark EOG Resources +5Y, 30Y tap
- 11/19 $Benchmark Bangkok Bank 5Y +115a, 10Y +130a
- 11/19 $Benchmark Western Alliance Bank 10NC5 +312a
- 11/19 $Benchmark Baxter 3Y +130a, 5Y +155a, 10Y +185a
- 11/19 $Benchmark First Abu Dhabi Bank (FAB) investor calls
US DATA: Atlanta Fed GDPNow Sees Cycle High 4.2% GDP In Q3
Nov-19 15:06
The Atlanta Fed's GDPNow estimate for Q3 is now up to a cycle high 4.23% Q/Q SAAR - up from 4.05% prior. That is the highest estimate yet for Q3 from the Atlanta Fed, and if their model is correct, it would be the strongest since Q3 2023.
- "After recent releases from the US Census Bureau and the US Bureau of Economic Analysis, a decrease in the nowcast of third-quarter real gross private domestic investment growth from 4.9 percent to 4.8 percent was more than offset by an increase in the nowcast of the contribution of net exports to third-quarter real GDP growth from 0.57 percentage points to 0.78 percentage points."
- Indeed inventories and net exports make up 1.11pp of that growth, so final domestic demand is running closer to 3%, but apart from weak structure (both residential and nonresidential) investment, the economy looks to be firing on all cylinders with PCE estimated to grow 3.4% Q/Q SAAR.
- As noted earlier, MNI expects the BEA to be able to provide a Q3 advance GDP estimate by early December.
BONDS: Equity Bid Weighs
Nov-19 15:05
Recent weakness in core global FI seems largely tied to a bid in equities through the Wall St. cash open.
- Firmer Atlanta Fed GDPNow also a potential factor.
- Long end gilts hold wider vs. both German & U.S. peers in light of the ongoing speculation surrounding the future of PM Starmer.
