BOE: VIEW CHANGE: Berenberg Look For December Cut on October CPI
Nov-19 08:48
Berenberg bring forward their call for the next 25bps Bank of England rate cut to December.
- Berenberg refer to Governor Bailey's comments that he is waiting to see disinflation continued in “upcoming economic developments this year”, and conclude "slower wage growth and services price increases than the central bank anticipated since will likely convince him that it has".
- However, Berenberg are cautious on the path ahead: "With signs that past falls in Bank Rate are already supporting an increase in nominal demand, we doubt that a cut in December would signal a rapid further reduction in interest rates ahead. Our central forecast is that the BoE reduces interest rates once more in Q1 2026 to 3.50%."
- BoE-dated OIS now sit 1.5-2.0bp more dovish on the session following today's CPI data, showing ~20.5bp of easing for December, ~29bp through February, 37bp through March and 47bp through April.
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BOJ: May Revise Up FY25 Growth Forecast At Oct Meeting: Reuters
Oct-20 08:44
Reuters sources on the BOJ's growth forecasts:
- " BOJ MAY SLIGHTLY REVISE UP ECONOMIC GROWTH FORECAST FOR FISCAL 2025 AT OCTOBER POLICY MEETING, SOURCES SAY" Reuters
- "BOJ LIKELY TO MAINTAIN VIEW ECONOMY ON COURSE FOR MODERATE RECOVERY, DESPITE HEADWINDS FROM U.S. TARIFFS, SOURCES SAY" Reuters
BUNDS: Cash Basis Trade
Oct-20 08:25
Bund Basis trade, suggest Cash seller:
- RXZ5 7k at 129.83.
GILTS: Steady Open; Trend In 10-year Yields Still To The Upside
Oct-20 08:22
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)
