US DATA: Surprisingly Broad-Based August Manufacturing Weakness Looks Temporary

Gilts have bull flattened in the time since the U.S. Treasury announced an increase in buybacks in the long end, with the 2s30s gilt curve ~3bp flatter over the last 90 minutes or so, unwinding the bull steepening that followed this morning’s CPI data.

• Benchmark yields run 3-5bp lower vs. closing levels, although 10s hold above 5.00%.
• Futures peak at 86.65 before paring back to trade +31 at 86.38.
• Initial resistance at the 20-day EMA (87.03) goes untested, leaving the bearish technical picture intact, although a more active Treasury approach when it comes to containing long end yields may lessen cross-market pressure on yields further out the curve (all else equal).

EGB spread compression vs. Bunds was seen as markets welcomed active liquidity management in the U.S. (after the Treasury announced an upsizing of long end buybacks), although the move has faded a little in the time since the initial reaction to the headlines.

• Benchmark spreads that we monitor are flat to 2bp tighter on the day.
• OAT/Bunds back below 85bp, with the ’25 closing high (86.05bp) intact.
• BTPs and GGBs outperform given higher sensitivity to swings in broader risk appetite, BTP/Bunds back below 80bp, with July closing highs (84.6bp) going untested.
• RFGB widening around the pricing of the syndication of the Apr-33 line quickly faded given the broader moves in bonds. The syndication pricing was stronger than initial guidance levels, with the amount sold (EUR4bln) matching the upper end of our estimated range.

SFRU6 96.18/96.12ps, bought for 1.625 in 10k total.