GILTS: Support In Futures Pierced Before Recovery
May-14 09:32
Gilts have recovered from session lows, after being pressured by concession ahead of this morning’s 10-Year auction.
- Gilts based just ahead of the bidding deadline, with the auction generating solid demand metrics, despite the LAP printing comfortably below the pre-auction mids.
- Futures breached their April 15 low (91.43), basing at 91.39 before a recovery to 91.50.
- Yields effectively flat on the day across the curve.
- 2s continue to trade sub-4.00% after yesterday’s brief and limited break above.
- 10-Year yields have pierced the April 15 high (4.672%) during the past couple of sessions but haven’t meaningfully extended beyond that point.
- BoE-dated OIS little changed on the day, showing 47bp of cuts through year-end, with the next cut fully discounted through the end of the September MPC.
- SONIA futures little changed to 3.0 lower, terminal BoE pricing (proxied by SFIU6) sits at ~3.60%, 30bp above recent dovish extremes.
- Hawkish BoE dissenter Mann didn’t move markets as she outlined the reasoning behind her latest vote, while Deputy Governor Breeden didn’t touch on monetary policy.
- Macro and cross-market cues are eyed from here, with little of note on the UK calendar until tomorrow’s preliminary Q1 GDP data.
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BONDS: Gilts Unwind A Portion Of Last Week's Selloff, Outperforming Bunds
Apr-14 09:30
The 10-year Gilt/Bund spread has tightened 5bps to 213bps, with UK paper staging a light relief rally alongside USTs this morning. Market moving headline flow has been relatively limited, with participants assessing weekend rhetoric from US officials on consumer electronics tariffs alongside the highly volatile nature of last week’s moves.
- Gilt yields are 3.5-9.5bps lower across the curve, bull flattening. 2s30s has fallen 6bps to ~141bps, unwinding last week’s notable steepening.
- German yields are flat to 3bps lower, with the belly outperforming.
- Futures volumes are comfortably below recent averages. Bunds are -14 ticks at 130.84 (Initial resistance at the Apr 11 high of 131.42; Support at the 20-day EMA of 129.59). Gilts are +66 at 91.30 (Initial resistance at the 20-day EMA of 91.84; Support at Apr 11 low of 90.47).
- Strength in US equity futures has fed well into outperformance for cash European indices this morning. The reprieve for electronics imports from China into the US is the driver here. That helps 10-year EGB spreads to Bunds tighten.
- BTPs outperform, also aided by S&P’s upgrade of Italy's sovereign rating to BBB+ (Outlook Stable) after hours on Friday.
- This week’s regional calendar is headlined by UK labour market (Tues) and inflation (Weds) data and the ECB decision (Thurs).
EQUITIES: Estoxx put Spread
Apr-14 09:22
SX7E (17th Apr) 170/165ps, bought for 1.35 in 6k vs ~1.1k at 167.00.
EURIBOR: EURIBOR FIX - 14/04/25
Apr-14 09:20
EURIBOR FIX - EMMI/Bloomberg
- EUR001W 2.3560 -0.0330
- EUR001M 2.2520 -0.0520
- EUR003M 2.2520 -0.0270
- EUR006M 2.2120 -0.0320
- EUR012M 2.1260 -0.0410
