BUNDS: /SWAPS: Long End ASW Outperformance On Lack Of Syndication
Feb-05 14:43
Some outperformance for the long end of the German ASW curve during today’s bond rally.
- This goes against the recent theme of underperformance for long end ASWs, which has been driven by the market’s continued adjustment to increased free float and supply/fiscal risks.
- Today’s long end ASW outperformance likely stems from the lack of a 30-year syndication announcement from the DFA, with Monday’s market volatility acting as a prohibitive factor for an announcement earlier in the week.
- We had pencilled the syndication in for this week, with broader market expectations matching our own, seemingly building some concession into longer-dated ASWs in anticipation of the syndication.
- 30-Year Buxl vs. 3-month Euribor registered a fresh cycle closing low yesterday, before rallying by ~1bp today.
- We still don’t completely rule out a mandate being issued this afternoon, but an announcement and syndication next week is a much more likely outcome given the recent norm of morning mandate announcements/not issuing on a Friday.
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US: Trump Denies WAPO Story On Watering Down Tariffs
Jan-06 14:43
US President-elect Donald Trump has issued a statement on Truth Social denying a widely circulated report published by the Washington Post this morning claiming that Trump's aides are exploring "tariff plans that would be applied to every country but only cover critical imports". See: US: Trump Aides Exploring More Limited Universal Tariff Plan, WAPO
- Trump: "The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back. That is wrong. The Washington Post knows it's wrong. It's just another example of Fake News."
- Trump offered no new information on his tariff strategy in an interview with Hugh Hewitt this morning but suggested he and Chinese President Xi Jinping "will probably get along very well."
- Trump told Hewitt: "...their economy is not doing very well right now, and they need us very badly. I believe we will, you know, I had a great relationship until COVID. That was a that was a bridge too far, but I had a great relationship with President Xi."
SONIA: Put spread buyer
Jan-06 14:38
2NH5 95.30/94.80ps, bought for 1.5 in 5k.
GILTS: Marginal Outperformance Vs. Peers
Jan-06 14:37
Gilts unwilling to fade the London morning recovery at this stage, even as peers sell off again, leaving yields little changed to 1bp higher across the curve.
- Building $IG slate and Trump’s pushback against media reports pointing to a softer tariff approach helps Tsys away from highs, while Bunds are pressured by German CPI.
- 10-Year gilts 1bp tighter vs. Tsys on the day.
- Meanwhile, UK paper also outperforms Bunds by ~1bp, spread failed to break below 215bp on an earlier test, having not closed below that level since December 9.
- Futures -15 at 92.08, bearish technicals intact. Initial support and resistance 91.64/92.88.
- GBP725mln of medium-term APF sales due from the BoE in ~10 minutes.
