GILTS: Under Light Pressure As Cross-Market Cues Dominate
Mar-13 09:29
Cross-market cues continue to dominate given the lack of meaningful local developments.
- Core global FI edges lower again in recent trade as equities move away from session lows.
- UK fiscal stories continue to focus on the need for rebuilding fiscal headroom, although there isn’t much new within the FT’s latest piece, as their sources point to the need for welfare and departmental spending cuts.
- Futures as low as 91.27.
- Bearish technical trend in the contract remains intact.
- Initial support at yesterday’s low (91.27) is being tested, protecting more meaningful support at the March 6 low (90.73).
- Yields 0.5-1.5bp higher.
- 2s10s and 5s30s continue to hover around cycle closing highs. Those with steepener positions will want to force the first close above 50bp in 2s10s since May ‘22 and the first close above 100bp in 5s30x since May ’21.
- Modest outperformance (~1.5bp) noted for 10s vs. Bunds. Spread last 183.5bp after yesterday’s failure to break through the key support cluster (175/174.5bp).
- BoE-dated OIS little changed, showing ~52bp of cuts through year-end vs. 53.5bp late yesterday, long end weakness dominates.
- Little of note on the UK calendar until tomorrow’s monthly GDP data.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.462 | +0.7 |
May-25 | 4.271 | -18.4 |
Jun-25 | 4.216 | -23.9 |
Aug-25 | 4.078 | -37.6 |
Sep-25 | 4.042 | -41.3 |
Nov-25 | 3.953 | -50.1 |
Dec-25 | 3.936 | -51.8 |
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NORWAY: Offsetting Productivity and Compensation Impacts From Q4 GDP Report
Feb-11 09:28
The Q4 GDP print had mixed implications for the March MPR rate path from an income/productivity perspective. Although mainland real productivity per hour growth was -0.5% Q/Q (vs 0.5% prior), annual wage growth was below Norges Bank’s December MPR projection at 5.0% Y/Y (vs 5.2% forecast, 5.7% prior).
- Whole-economy employment growth was 0.2% Q/Q (in line with the Q4 Regional Network Survey) and 0.6% Y/Y (in line with the December MPR projection). Meanwhile, hours worked grew 0.1% Q/Q on a whole-economy and mainland basis.
- These productivity, compensation and hours worked dynamics have offsetting impacts on overall unit labour cost growth.
- The weak productivity reading takes some of the shine off last quarter’s upward productivity revisions going back to 2022, but we don’t want to overstate its impact. We noted earlier that headline GDP weakness (-0.6% Q/Q) was largely due to a pullback in inventory investment, and a good deal of that would’ve bled into the mainland GDP reading too (and thus weigh on productivity growth).
- Taken alongside the GDP expenditure breakdown covered earlier, with think the Q4 GDP report should still be a dovish factor in the March MPR rate path. Governor Wolden Bache will likely reaffirm guidance for a 25bp March cut at her annual address on Thursday.
CROSS ASSET: New session lows for Bond Futures
Feb-11 09:27
- New lows for the Bund, and German Govie futures lead the way to the downside, Supply Delta hedging needs has been weighing since the Cash open.
- Tariffs announcement has also played its part, although the move in the US Treasuries lags, with the 109.01 level still holding in TYH5, this was the Post NFP printed low.
- As noted on the Bund open, 132.95 is the first downside hurdle, the NFP printed low, but better support is seen at 132.72.
- The move in Yields could keep the USDJPY underpinned.
EU-BOND SYNDICATION: 2.50% Dec-31 EU-bond / 3.25% Feb-50 Green: Final terms
Feb-11 09:23
2.50% Dec-31 EU-bond
- Spread set at MS+37bps (guidance was: MS + 39bps area)
- Size: E6bln WNG (MNI expected E4-6bln)
- Books in excess of E75bln (inc E4.5bln JLM interest)
- ISIN: EU000A3L1DJ0
3.25% Feb-50 Green EU-bond
- Spread set at MS+108bps (guidance was: MS+110bps area
- Size: E5bln WNG (MNI expected E4-6bln)
- Books in excess of E80bln (inc E5.5bln JLM interest)
- ISIN: EU000A3K4EU0
For both
- Settlement: 18 February 2025 (T+5)
- JLMs: Citi / DB / HSBC / Morgan Stanley (B&D/DM) / Societe Generale
- Timing: Books to close at 10:00GMT / 11:00CET, pricing later today
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