EU FINANCIALS: UniCredit: Rumored to target BPER             

Bund Basis trade, suggest Cash seller:

• RXZ5 7k at 129.83.

A fairly steady open for Gilts ahead of an important week for UK data. Futures are -4 ticks at 92.42. A short-term bull cycle in futures remains intact though, with initial resistance at Friday’s high of 93.17.

• Yields are up to 1bp higher across the curve. 10-year yields are currently 4.536%, down from this month’s 4.758% high. Despite this month’s fall in yields, the medium-term trend for the 10-year is still to the upside. Initial support is the April 7 low at 4.363%, which shields trendline support drawn from the November 2022 low at 4.232% today.
• See MNI’s Tech Trend Monitor for more, which also includes charts on the 30-year Gilt yield.
• Fiscal policy remains a key focus for the Gilt market ahead of the Nov 26th budget. The main fiscal headlines from the weekend have suggested that VAT may be removed from energy bills.
• September public sector finance data is due on Tuesday. After correcting for a VAT error in last month’s release, PSNB is currently tracking GBP9.4bln below the OBR’s forecast year-to-date.
• This release, alongside Wednesday’s CPI report (important  for the near-term BOE outlook) will feed into the OBR’s Round 3 forecast on October 31 ( see here for more).

Figure 1: 10-year Gilt Yields (Source: Bloomberg Finance L.P)

Of note:

USDJPY ~2bn at 150.00/150.05.

EURUSD ~1bn at 1.1700 (tue).

NZDUSD 1.1bn at 0.5700 (wed).

AUDUSD 1.49bn at 0.6450 (fri).

• EURUSD: 1.1645 (665mln), 1.1650 (331mln), 1.1670 (211mln), 1.1700 (346mln), 1.1705 (206mln), 1.1715 (740mln).
• USDJPY: 150.00 (1.28bn), 150.05 (823mln), 150.25 (600mln), 150.50 (355mln), 151.00 (779mln), 151.70 (1.1bn).
• USDCAD: 1.4000 (718mln).
• AUDUSD: 0.6500 (340mln).
• AUDNZD: 1.1325 (400mln).