GILTS: Twist Flattening Holds, BoE Comments Eyed
Twist flattening has dominated on the gilt curve this morning, with 3 factors defining this morning’s price action:
- Spillover from Tsys after U.S. President Trump pushed back against the idea that he was looking to fire Fed Chair Powell, as well as some comments pointing to the potential for a moderation in the Sino-U.S. trade war.
- The DMO’s revised gilt remit surprising most by coming in marginally lower than the prior estimate, skewing issuance further away from the long end in the process (T-bill, short-dated and unallocated bucket issuance was revised higher, while long-end issuance was revised lower).
- Softer-than expected flash PMIs.
- Gilt futures broke through initial resistance at the open, with bulls now looking to pierce 93.00 before shifting focus to a Fibonacci retracement at 93.44. The contract last prints 92.80 vs. session highs of 92.95.
- Yields 3.5bp higher to 9bp lower.
- 2s10s ~13bp off cycle closing highs, last ~65.6bp.
- 5s30s ~11bp off yesterday’s cycle closing high, last 127.8bp.
- BoE-dated OIS covering ’25 meetings back to little changed on the day, showing 92bp of cuts through year-end, with the next 25bp step still fully discounted through the May meeting. Recent range extremes of ~97bp of cuts through year-end remains untested/intact.
- Comments from BoE’s Pill (11:30 BST), Bailey (18:15 BST) & Breeden (19:00 BST) due throughout the day.
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MNI: UK FLASH MARCH MANUF PMI 44.6 (FCAST 47.2, FEB 46.9)
- UK FLASH MARCH MANUF PMI 44.6 (FCAST 47.2, FEB 46.9)
- UK FLASH MARCH SERVICES PMI 53.2 (FCAST 51.0, FEB 51.0)
EGB FUNDING UPDATE: German Q2 Funding Update
The DFA has announced that there are no changes to auction sizes in Q2 for either capital markets or for Bubills. This was broadly as expected - with increases in issuance only expected in H2 of this year (if there is an increase in defence spending quickly, that can probably be financed from cash reserves until issuance plans can change for H2). The DFA did, as usual, announce the breakdown of 15/30-year auctions for Q2:
- 15-year Bund auctions:
- 30 April: E1.5bln of the 2.60% May-41 Bund (ISIN: DE000BU2F009) alongside E500mln of another issue.
- 28 May: E1.5bln of the 1.00% May-38 Bund (ISIN: DE0001102598) alongside E500mln of another issue.
- 30-year Bund auctions:
- 16 April: E1.5bln of the 2.90% Aug-56 Bund (ISIN: DE000BU2D012) alongside E1bln of another issue.
- 14 May: E1.5bln of the 2.90% Aug-56 Bund (ISIN: DE000BU2D012) alongside E1bln of another issue.
- 18 June: E1.5bln of the 2.50% Aug-54 Bund (ISIN: DE000BU2D004) alongside E1bln of another issue.
GILTS: /MONTH-END EXTENSIONS: Slightly Lower Than Average Benchmark Extension
UBS expect the “UK index to extend by ~0.07 years at month-end, which is slightly lower than the historical 3-year average end-Mar extension of ~0.09 years. The UK inflation-linked index is expected to extend by a huge 0.06 years at the end of this month due to UKTI 2049 syndication and UKTI Mar-2026 dropping out of the index”.
