GILTS: Back To Flat, Cross-Market Cues And Local Data Driving Things
Jan-22 10:38
ross-market cues dominate this morning, with a bid in equities and peripheral EGBs initially leading gilts higher, before a pullback from highs.
- Futures -3 at 92.20, range 92.12-52.
- Futures breached yesterday’s high, peaking at 92.52, but failed to challenge Fibonacci resistance at 92.75.
- The overarching technical setup remains bearish, but the recent recovery poses a risk to that trend.
- Bears need to force a move through the Jan 16 low (90.68) to assert fresh pressure.
- Yields essentially flat across the curve.
- 10-Year spread to Bunds ~1bp wider around 208.5bp after the first sub-210bp close since November.
- Higher-than-expected PSNB may have factored into the spread widening this morning.
- BoE-dated OIS shows 67bp of cuts through year-end, ~4bp more dovish on the day.
- The Brightmine wage survey (released overnight) may be having some impact in STIRs.
- Median basic pay awards in the 3 months to December dropped to 3.3%, the second consecutive softening in pay awards.
- The press release that accompanied the data noted that "the combination of rising NICs and ongoing economic pressures is likely to result in a decrease in 2025 pay awards compared to the median increase of 4.5% recorded in 2024."
- Chancellor Reeves will speak to CEOs later today, early Wednesday comments from her offered no new information.
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EGB OPTIONS: RXG5 136/137 Call Spread Lifted
Dec-23 10:32
RXG5 136/137 call spread paper paid 11 on 4.5K.
FOREX: EUR Trades Heavy, But Quiet Market Looks Through Tariff Talk
Dec-23 10:29
- Newsflow and price action is understandably muted, with market volumes well below average for this time of day given the proximity to the Christmas market closures that kick in in earnest tomorrow. That said, EUR is softer on the session, with continued focus on French politics. The French PM is set to unveil a new cabinet later today - a slightly later timeline than initially expected - which may be weighing on French bonds and, in turn, the single currency.
- Having traded 0.8315 overnight, EUR/GBP is back to negative on the day - having reversed ahead of any test on the 50-dma at 0.8319 - a level markets have failed to break on three occasions in the past week or so.
- EUR/NOK is lower for a second session, extending the reversal off the post-Norges Bank high to just over 1%. Rate is now meeting support at the confluence of the 50-, 100-dmas of 11.7666/65. The greenback is more mixed. The USD Index is very mildly higher, but is holding the majority of Friday's slippage - leaving 108.541 the key level ahead.
- As a gauge of lighter volumes and limited liquidity today: EUR futures have traded volumes ~20% below average for this time of day, GBP ~50% lower and JPY ~40% lower. Tariff headlines failed to ignite significant market moves, despite reports that the US have triggered investigations into the legacy semiconductors industry that could result in steeper tariffs on Chinese goods once Trump is in office.
- Building permits data is unlikely to move the needle, however prelim durable goods data is also set for release, as well as the December consumer confidence report. There are no central bank speakers of note.
BOE: MNI BOE Review - December 2024
Dec-23 10:28
- The Bank of England’s MPC voted to keep Bank Rate on hold at 4.75% on Thursday with the guidance largely unchanged.
- However, there was a surprise in the vote split with both Ramsden and Taylor joining Dhingra in voting for an immediate 25bp cut.
- The MPC were largely dismissive of higher wage growth and continue to look for "gradual" cuts.
- We don't think the extra dissenters now change the course for the BOE; we expect they would have looked for sequential cuts early in 2025 anyway.
