GILTS: Twist Steepening Extends As Lon End Sells Off
Dec-12 15:29
Cues from Tsys have promoted weakness in gilts since NY trading got underway.
- Futures trade as low as 90.91 after respecting yesterday’s high during the opening rally.
- Initial support at 90.62 remains untested
- Yields 0.5bp lower to 6bp higher as the twist steepening seen this morning extends, pushing 2s10s and 5s30s further away from post-Budget lows.
- Twist steepening of the curve promoted by the soft UK GDP data driving dovish BoE repricing in the front end of the STIR curves, while also calling into question the optimistic economic growth forecasts that accompanied the Budget. Slower GDP growth would erode some of the government’s envisaged fiscal headroom if the trend was to persist.
- Beta to Tsys sees Gilt/Bunds back above 165bp after registering the first close below the level for ’25 on Thursday.
- SONIA futures +2.0 to -3.5, also twist steepening.
- BoE-dated OIS pricing ~22bp of easing for next week and 60bp of cumulative easing through the end of ’26, with liquid contracts little changed to 2bp more dovish on the day, holding London morning moves.
- Broader GBP STIRs trade off dovish session extremes as gilts move away from highs.
- Outside of the BoE decision, next week will also bring the latest labour market report and inflation data
- Expect our full suite of previews to be published ahead of those events.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.755 | -21.9 |
Feb-26 | 3.692 | -28.2 |
Mar-26 | 3.612 | -36.2 |
Apr-26 | 3.508 | -46.7 |
Jun-26 | 3.463 | -51.1 |
Jul-26 | 3.405 | -56.9 |
Sep-26 | 3.391 | -58.3 |
Nov-26 | 3.373 | -60.1 |
Dec-26 | 3.374 | -60.0 |
Feb-27 | 3.386 | -58.8 |
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
SOFR OPTIONS: Midcurve outright Call buyer
Nov-12 15:25
3QM6 96.87c, bought for 13.5 in 2kl.
EUROSTOXX50 TECHS: EUROSTOXX50 Futures Bull Cycle Extends
Nov-12 15:22
- A medium-term bull trend in EUROSTOXX 50 futures remains intact.
- The contract has traded through resistance at 5742.00, the Oct 29 high to confirm a resumption of the uptrend.
- This paves the way for an extension within the bull channel.
- On the downside, initial firm support is seen at levels around the 20-day EMA.
FED: Atlanta's Bostic To Retire In February, Putting Appointments Back In Focus
Nov-12 15:20
In a surprise announcement, Atlanta Fed President Bostic will retire from his position when his term concludes on February 28 2026. He's been president of the Fed bank since 2017. Note that he (and whoever the next Atlanta Fed president is) is a non-FOMC voter in both 2025 and 2026, with the Atlanta Fed next voting in 2027. Bostic's speaking at the Atlanta Economics Club at 1215ET so we may hear more about his decision.
- Unlike some recent regional Fed retirees, he is not being forced to depart mid-term due to reaching the mandatory retirement age (he's 59 now so would have had to retire in 2031 at age 65).
- Note that all 12 regional Fed presidents theoretically need to be reconfirmed by the Fed Board in February. "Under the Federal Reserve Act all Reserve Bank presidents serve five-year terms that expire at the end of February in years ending with the numerals 1 or 6."
- There had been some speculation that President Trump could attempt to influence the reappointment process by gaining a majority on the 7-member Fed Board that had the power to shape the regional Fed voting bloc on the FOMC. That would assume that Bowman and Waller are sympathetic to White House influence, in addition to Gov Miran's successor (his term is up in January, and his replacement could be the next Fed Chair if it isn't Bowman or Waller), with Gov Cook's legal battle including Supreme Court hearing in January looming large in this regard.
- Chair Powell was asked at the October FOMC about the Fed Board's timeline for this reappointment process - he said "it's a process that we go through under the law....We're in the middle of that process and we're going to complete it in a timely way, and I really, that's really all I can say."
- The Atlanta Fed is forming a search committee to find Bostic's replacement - the bank's "first vice president and chief operating officer, Cheryl Venable, will assume the duties of president on an interim basis until a new president is appointed, if a successor is not appointed by February 28, 2026, in accordance with Section 4 of the Federal Reserve Act."
