GILTS: Under Pressure On Hawkish EUR Cues, Recent Lows In Futures Intact
Dec-10 10:36
Ongoing extension of the hawkish repricing in the short end of the EUR curve has weighed on gilts this morning. 5s and 10s register fresh month-to-date highs in yields.
- Futures -64 at 90.79. Initial support and resistance located at 90.62 & 91.29, respectively. Bears have negated much of the recent bullish move.
- A reminder that we have suggested that post-Budget movement in OI in futures doesn’t point to the establishment of a meaningful number of high conviction longs since that event, despite the market apparently deeming Chancellor Reeves’ fiscal consolidation to be credible.
- Risks surrounding the backloaded nature of the fiscal consolidation that was outlined in the Budget may be key here, albeit with the cash curve flattening as the DMO continues to skew issuance away from the long end.
- Yields 3-4bp higher across the curve. 5s under the most pressure.
- Gilt bulls are still unable to force the gilt/Bund spread below 165bp on a sustained basis.
- Little of note for markets to trade off as Chancellor Reeves is questioned by the Treasury Select Committee on the Budget and leaks leading up to the event.
- 4.75% Oct-35 gilt auction passes smoothly.
- SONIA futures flat to -6.0, strip steepens. SFIZ6 & Z7 trade to fresh multi-week lows.
- BoE-dated OIS still prices ~22bp of easing for this month’s decision, we look for a cut at that event.
- Terminal rate pricing ~3.45% after threatening a move below 3.30% in recent weeks.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.756 | -21.8 |
Feb-26 | 3.700 | -27.4 |
Mar-26 | 3.631 | -34.3 |
Apr-26 | 3.544 | -43.0 |
Jun-26 | 3.512 | -46.3 |
Jul-26 | 3.461 | -51.3 |
Sep-26 | 3.456 | -51.8 |
Oct-26 | 3.449 | -52.5 |
Dec-26 | 3.453 | -52.1 |
Feb-27 | 3.470 | -50.4 |
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GERMAN T-BILL AUCTION RESULTS: 3/9-Month Bubills
Nov-10 10:33
| Type | 3-month Bubill | 9-month Bubill |
| Maturity | Feb 18, 2026 | Aug 19, 2026 |
| Allotted | E2.275bln | E1.722bln |
| Previous | E2.446bln | E1.78bln |
| Total sold | E3bln | E3bln |
| Target | E3bln | E3bln |
| Avg yield | 1.917% | 1.943% |
| Previous | 1.711% | 1.899% |
| Bid-to-cover | 1.43x | 2x |
| Previous | 1.95x | 1.8x |
| Bid-to-offer | 1.08x | 1.15x |
| Previous | 1.19x | 1.07x |
| Previous date | Oct 20, 2025 | Oct 20, 2025 |
BONDS: Off Lows On Peripheral & OAT Demand Stemming From Risk-On Price Action
Nov-10 10:31
Tentative movement towards the reopening of the U.S. government has boosted border risk sentiment.
- This initially weighed on core global FI markets before outperformance for peripheral EGBs & OATs helped wider core global FI markets off lows.
- Gilt and Bund futures have retraced much of their move lower, while OAT & BTP futures are now higher on the day.
- Bund futures -9 at 129.03 vs. session lows of 128.80. Initial support at 128.96/92 was breached, but Fibonacci support at 128.52 went unchallenged. Bears remain in short-term control.
- German yields are 0.5-1.5bp higher, now bear flattening after bear steepening at the open.
- EGB spreads to Bunds 0.5-2.0bp tighter, OATs outperform with the spread vs. 10-Year Bunds ~77.5bp.
- No outperformance for Greece evident after a move to Positive outlook at Scope Ratings on Friday.
- Gilt futures base at 92.75 before recovering to 93.09, -12.
- UK yields little changed to 0.5bp higher across the curve.
- Short end pricing little changed when looking at the bigger picture. ~40% odds of one further ECB cut priced for this cycle, while GBP markets price ~17bp of easing through year-end and fully discount the next BoE cut come the end of the Feb meeting.
- Little of note on the European & UK calendars today.
- Labour market data (due tomorrow) headlines this week’s UK calendar.
FOREX: Pro-Growth Expectations on Shutdown Optimism Favour AUD, Hamper JPY
Nov-10 10:24
- A pro-growth impulse from expectations for the US government reopen potentially this week has led the USD to consolidate last week's losses. Reactions across G10 do not surprise, with positive risk sentiment apparent through strong equity performance weighing on the low-yielding JPY and CHF while supporting the likes of AUD, NZD and NOK.
- USDJPY subsequently sees renewed upside today, clearing Friday's highs and approaching the Nov 4 high at 154.48, the bull trigger. A break of this level would confirm a resumption of the uptrend and open 154.80, the Feb 12 high. First important support lies much further out at 152.46, the 20-day EMA.
- AUD received further tailwinds from RBA Hauser comments being on the hawkish side. For AUDUSD (+0.68%), a break above key resistance at 0.6618 (Oct 29 high) would be required to reinstate a bullish theme.
- NOK meanwhile also benefits from an upside surprise to domestic October CPI. A December cut was already unlikely following last week's Norges Bank meeting and the prospects of that are likely to fall back even further. EURNOK has extended the pullback from 11.80, potentially forming a double top pattern multi-week.
- ZAR outperforms in emerging market FX, very much a product of the precious metals rally (gold +2%), which adds further support to the positive risk backdrop and consolidating dollar weakness.
- Key to watch in the days ahead will be further developments on the shutdown, with a handful of legislative hurdles still to be met: Senate is yet to formally schedule a vote final passage, and a House vote will have to follow. Comments from Fed’s Daly & Musalem, as well as BoE’s Lombardelli, headline a limited G10 calendar today.
