EURGBP TECHS: Trend Structure Remains Bullish

The MBA mortgage applications composite pulled back to 3-week lows in the Sep 26 week, with a 12.7% W/W decline that follows over 30% of gains seen earlier in the month.

• Purchase applications fell 1%, but it was refinancings - which had risen over 70% to lead overall gains in September - falling 20.6% that led the decline.
• Still, activity remains above levels seen at the start of the month.
• With falling mortgage rates key to the rise in applications, it's no surprise that a rebound in rates has coincided with a fall in applications: after dropping 35bp in the prior 4 weeks, 30Y conforming mortgage rates rose 12bp.
• At 6.46%, they remain below the 6.64% at the end of August, however; the same can be said for Jumbo rates which at 6.54% rose 10bp in the latest week though remain (just) below the 6.58% at end-August.
• Spreads widened slightly in the latest week, but the larger contributor was the underlying rise in Treasury/swap yields vs the prior week.
• Overall applications remain weak vs historical averages (see chart), particularly for outright purchases, though there is clearly an appetite for refinancing when rates dip. That suggests that unless rates go considerably lower, there is unlikely to be much impetus for renewed residential activity. 

• Stocks continue to rise late Wednesday, ignoring for the moment at least, last night's US government shutdown as SPX eminis quietly rise to a new record high in late trade (6,768.0 +29.25).
• Much lower than expected ADP data contributed to a rise in rate cut projections helped kindle risk appetites in the irst half, as did the shift in focus from the shutdown to fundamentals and the Supreme Court denying Trump from firing Fed Gov Cook until oral argument on the case is heard in January 2026.
• Currently, the DJIA trades up 91.02 points (0.2%) at 46484.55, S&P E-Minis up 27.75 points (0.41%) at 6766.25, Nasdaq up 111.2 points (0.5%) at 22770.28.
• Leading gainers in the second half included Health Care and Utility sector shares, pharmaceuticals leading the former: Eli Lilly +9.08%, Thermo Fisher Scientific +8.74%, Biogen +7.97%, Merck & Co +7.84% and Regeneron Pharmaceuticals +7.71%
• The Utilities sector was buoyed by AES - surging 16.57% higher as wires reported BlackRock's GIP is in advanced talks to purchase the energy company. Follow-through support for other energy companies includes: Constellation Energy +5.33%, Vistra +3.22% and PG&E +3.05%.
• Conversely, Materials and Financial sectors led decliners in the second half. Weighing on Materials: Corteva -8.87%, CF Industries Holdings -2.83%, Vulcan Materials -2.45% and Ecolab -2.01%.
• Meanwhile, Raymond James Financial -3.23%, Robinhood Markets -3.10%, Wells Fargo -3.05%, Northern Trust -2.99% and Charles Schwab-2.95% weighed on the Financials sector.

European curves steepened Wednesday, with Gilts slightly outperforming Bunds.

• Yields were higher in early trade, amid uncertainty over the U.S. federal government shutdown that started overnight, and supply weighing somewhat (E5B of 10Y Bund).
• However, the tone was lightened as data proved to be on the dovish side: Italian and Spanish PMIs disappointed, while yields saw the biggest move of the day (to the downside) as US ADP private payrolls unexpectedly contracted. Eurozone HICP came in broadly in line with consensus.
• On the day, the German and UK curves both twist steepened.
• Periphery/semi-core EGB spreads closed a little tighter, with BTPs outperforming.
• Thursday's schedule includes French industrial production and Spanish labor market data, with DMP inflation expectations the highlight of the UK docket. There will also be attention on Swiss inflation, as well as appearances by ECB's Makhlouf, Villeroy and de Guindos.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.6bps at 2.013%, 5-Yr is down 0.8bps at 2.301%, 10-Yr is up 0.2bps at 2.713%, and 30-Yr is up 1.8bps at 3.298%.
• UK: The 2-Yr yield is down 2bps at 3.965%, 5-Yr is down 1.9bps at 4.117%, 10-Yr is down 0.3bps at 4.696%, and 30-Yr is up 0.5bps at 5.511%.
• Italian BTP spread down 1bps at 81.3bps /  French OAT down 0.5bps at 81.7bps