GILTS: Underpinned By Offshore Drivers, Tender Sees Strong Demand
Jan-30 10:30
{GB} GILTS: Gilts remained underpinned, with the post-Fed recovery in core global FI markets and softer-than-expected European GDP data driving this morning’s rally.
- Futures +26 at 92.47 vs. highs of 92.50.
- The technical setup in futures remains unchanged, with the contract experiencing a short-term bullish correction within a longer run bearish trend.
- Initial support and resistance at 91.52/92.68.
- Yields 3.5-5.0bp lower, 10s lead the bid.
- 2s10s and 5s30s curve steepening looks to have halted for now.
- Fresh dovish repricing in the short end and or fresh issuance/fiscal risks are probably required to generate a meaningful extension of the steepening trend.
- Strong demand at the GBP1.5bln tender offer of the 0.125% Jan-26 gilt, cover topped 5.00x and the tailed narrowed vs. the prior sale, with demand evident despite the ongoing richness of the line (the line still looks overvalued even when accounting for its low coupon).
- GBP STIR pricing is relatively sticky around ~70bp of cuts through year-end.
- SONIA futures flat to +3.0.
- We have suggested that the market-implied rate cut profile still seems flat, despite some near-term hawkish risks.
- Little of note on the UK data calendar for the remainder of the week, which will leave much of the focus on cross-market cues and macro events.
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EUROZONE ISSUANCE: 13-Week GTB
Dec-31 10:29
| Type | 13-week GTB |
| Maturity | Apr 4, 2025 |
| Amount | E500mln |
| Target | E500mln |
| Previous | E500mln |
| Avg yield | 3.00% |
| Previous | 2.63% |
| Bid-to-cover | 1.44x |
| Previous | 2.12x |
| Previous date | Oct 30, 2024 |
BONDS: A wide trading range for Gilt
Dec-31 10:20
- A wide 40 ticks trading range for the Gilt contract, lower liquidity has helped exacerbate some of two way move, initially sold off on the Open, but has recovered towards its intraday high ahead of the Early close during the early Morning session.
- UK markets will be closing at 12.15GMT ahead of the New Year, and the timing for the closing Window in Gilt should be at 12:13-12:15 (GMT).
- Technically, the first resistance is seen further out, up 93.09, but market moves will likely stay limited with most Desks on the sidelines.
- US Treasuries and Tnotes have stayed within the Overnight ranges, just a 6 ticks range for TYH5 so far today.
- Immediate resistance for the US 10yr Bond futures is still at 109.08+, only managed a 109.06 high today.
COMMODITIES: WTI Futures Holding Higher
Dec-31 09:49
WTI futures are trading higher today as the contract extends recent gains. A stronger reversal to the upside would refocus attention on key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance is unchanged at $71.97. A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low.
- WTI Crude up $0.4 or +0.56% at $71.41
- Natural Gas down $0.14 or -3.51% at $3.799
- Gold spot up $8.09 or +0.31% at $2614.49
- Copper down $3.3 or -0.81% at $405.95
- Silver up $0.01 or +0.05% at $28.961
- Platinum up $8.16 or +0.9% at $912.55
