POWER: Swiss Hydro Stocks Rise Above 5-Year Avg for First Time This Year

Late on Friday Goldman Sachs noted that “gilts underperformed other major bond markets in August, following upside surprises to inflation and activity data”.

• They go on to write that “BoE Governor Bailey repeated the risk of inflation persistence, and the concern that low productivity growth and labour supply weakness necessitates restrictive policy. At the same time, ongoing weakening on the demand side of the labour market is a reminder of the downside skew of risks to the policy rate. We believe that disinflation in 2H25 will ultimately allow for deeper BoE cuts, but the onus is for the upcoming inflation data to give signs that inflation persistence is fading (the next inflation release comes on September 17)”.
• As a result, Goldman Sachs recommend 2s5s gilt curve steepeners given their base case for “deeper cuts, as well as the possibility that terminal rate expectations may be revised higher if data remains resilient”.
• Furthermore, their model suggests 2s5s screens flat vs. macro factors.

FX Exchange traded Option, Risk Reversal:

• AUDUSD (5th Dec) 64/67.5RR, bought the put for 0.17 in 1k.

Doesn't cover the last RBA 9th December meeting for this Year.

• MNI: EUROZONE AUG MANUF PMI 50.7 (50.5 FLASH, 49.8 JUL)