POLITICAL RISK: UK High Court Temporarily Bans Chagos Island Handover
The UK High Court has issued a temporary ban on the British gov't concluding talks with Mauritius that would see the Chagos Islands (formally 'the British Indian Ocean Territory') transferred to Mauritian sovereignty. The ban delivers "interim relief" to Chagossian Bertrice Pompe, who is engaged in legal action against the Foreign Office.
- The transfer of the Islands has been a political hot topic in the UK since the Labour gov't came to power in July 2024. Critics argue that giving the Islands, which are the location of a major joint UK and US naval and air force base on Diego Garcia, to a country that is seen as a close ally of China in the region represents a security risk. This is despite the initial 99-year lease that will be provided (reportedly at the cost of GBP90mn/year) and the sign-off to the deal given by the Trump White House.
- The main opposition centre-right Conservatives have criticised the agreement as "a betrayal of our national interest". PM Sir Keir Starmer has promised that MPs will ratify the final agreement, but given the gov'ts significant majority in the House of Commons, this will likely prove a formality.
- The High Court is due to hear the case again at 10:30BST (05:30ET, 11:30CET).
- There had been concerns in Downing Street that US President Donald Trump could look to obstruct the deal, but this has not been the case. It remains to be seen whether legal hold-ups result in a re-evalutation of this stance.
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GILTS: Twist Steepening Early Today, Dovish BoE Repricing Extends
Dovish repricing in BoE-dated OIS supports the front end of the curve, while weakness in long end Tsys since Thursday’s close weighs on 10+-Year gilts.
- Futures 92.25 last (92.09-40 range).
- Initial support and resistance unchanged at 91.73/92.63.
- Yields are 3bp lower to 3bp higher, curve twist steepens.
- 2s10s ~10bp below cycle closing highs, last 68.2bp.
- 5s30s ~2.5bp below cycle closing highs, last 133.1bp.
- Risks seem titled towards continued steepening given the UK’s economic and fiscal fragility, while the macro environment adds further weight to that view.
- Illiquid market conditions in the long end and spill over from Tsys have provided further sources of pressure in recent weeks.
- BoE-dated OIS now showing 91bp of cuts through year-end vs. 88bp early today.
- Little of note on the UK calendar on Tuesday, which will leave post-holiday adjustments and macro cues at the fore.
- In addition to the Wednesday risk events outlined in our GBP STIR bullet, note that tomorrow will see the release of public sector finance data and the resulting DMO remit revision. We will provide greater colour on this later today.
SILVER TECHS: Holding On To Its Recent Gains
- RES 4: $36.000 - Round number resistance
- RES 3: $34.903 - High Oct 23 ‘24 and the bull trigger
- RES 2: $34.590 - High Mar 28
- RES 1: $33.117 - 76.4% retracement of the Mar 28 - Apr 7 bear leg
- PRICE: $32.476 @ 08:23 BST Apr 22
- SUP 1: $30.577/28.351 - Low Apr 10 / 7 and the bear trigger
- SUP 2: $27.686 - Low Sep 6 ‘24
- SUP 3: $27.180 - Low Aug 14 ‘24
- SUP 4: $26.451 - Low Aug 8 ‘24 and a key support
Silver is holding on to the bulk of its recent gains. The latest recovery undermines a bearish theme. Price has traded through an important resistance around the 50-day EMA - at $32.269. The break higher signals scope for a test of $33.117, a Fibonacci retracement. Clearance of this level would strengthen a bullish condition. On the downside, initial firm support to watch lies at $30.577, the Apr 10 low.
GILT TECHS: (M5) Corrective Gains
- RES 4: 94.50 High Apr 7 and key resistance
- RES 3: 93.44 76.4% retracement of the Apr 7-9 sell-off
- RES 2: 93.00 Round number resistance
- RES 1: 92.63 High Apr 8
- PRICE: 92.28 @ 08:01 BST Apr 22
- SUP 1: 91.73/91.43 Low Apr 17 / 15
- SUP 2: 90.47/89.99 Low Apr 11 / 9
- SUP 3: 89.68 Low Jan 15 (cont)
- SUP 4: 88.96 Low Jan 13 and a key support (con)
A sharp sell-off in Gilt futures between Apr 7 - 9 continues to highlight a bearish threat and recent gains are considered corrective - for now. The contract has recently breached 90.55, the Mar 27 low. Clearance of this level confirms a full reversal of the Mar 27 - Apr 7 rally. Sights are on the 90.00 handle next, briefly pierced on Apr 9. A clear break of it would open key support at 88.96, the Jan 13 low (cont). Initial resistance is 92.63, Apr 8 high.
