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BONDS: EGBs-GILTS CASH CLOSE: Gilts, OATs Underperform

BONDS
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Gilts underperformed core EGBs Wednesday, but OATs fared yet worse.

  • Geopolitics played a key role in market movements for a 2nd consecutive session. A Reuters report suggesting Russia's Putin is open to discussing a Ukraine ceasefire deal with US President-Elect Trump weighed slightly on core FI ahead of the cash bond open.
  • We then got a marginally firmer-than-expected UK CPI report, which helped translate into UK FI underperformance of peers on the day.
  • In mid-afternoon, news that Ukraine fired a UK-made missile into Russia sparked a bounce in safe-haven FI. While the move subsided, periphery EGB spreads moved and remained wider.
  • BoE's Ramsden was typically dovish in his comments toward the cash close; Gilt futures ticked up but overall there was little reaction.
  • In data, Eurozone Q3 negotiated wages picked up as expected (5.4% Y/Y)  though the ECB are likely to look through this uptick.
  • The UK and German curves both twist steepened on the day. OAT spreads narrowed from session wides but still finished 1.6bp further outside Bunds (and underperforming periphery EGBs), on continued concerns around the 2025 budget.
  • Thursday's schedule includes UK public sector finances and Euro consumer confidence, with several central bank speakers including BoE's Mann and ECB's Lane.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Gilts underperformed core EGBs Wednesday, but OATs fared yet worse.

  • Geopolitics played a key role in market movements for a 2nd consecutive session. A Reuters report suggesting Russia's Putin is open to discussing a Ukraine ceasefire deal with US President-Elect Trump weighed slightly on core FI ahead of the cash bond open.
  • We then got a marginally firmer-than-expected UK CPI report, which helped translate into UK FI underperformance of peers on the day.
  • In mid-afternoon, news that Ukraine fired a UK-made missile into Russia sparked a bounce in safe-haven FI. While the move subsided, periphery EGB spreads moved and remained wider.
  • BoE's Ramsden was typically dovish in his comments toward the cash close; Gilt futures ticked up but overall there was little reaction.
  • In data, Eurozone Q3 negotiated wages picked up as expected (5.4% Y/Y)  though the ECB are likely to look through this uptick.
  • The UK and German curves both twist steepened on the day. OAT spreads narrowed from session wides but still finished 1.6bp further outside Bunds (and underperforming periphery EGBs), on continued concerns around the 2025 budget.
  • Thursday's schedule includes UK public sector finances and Euro consumer confidence, with several central bank speakers including BoE's Mann and ECB's Lane.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less