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BONDS: TD Recommend Long Gilt Vs. Bunds Ahead Of UK Budget

BONDS
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TD Securities recommend a long 10-Year gilt vs. Bund tactical pre-Budget trade, targeting a move to 170bp, with a stop set at 210bp. They outline several reasons for recommending the position:

  •  “An uncertain roadmap for both the fiscal and monetary side has been weighing heavily on Sterling rates.”
  • “Meanwhile, markets have been rather pessimistic on the euro area growth story.”
  • “Markets are currently pricing the ECB to cut rates to 1.9%, which is below the estimated neutral rate of 2.0-2.5% flagged by ECB members.”
  • “We also believe that Chancellor Reeves is very well aware of the consequences of any big fiscal deviations.”
  • “Data surprises have also started to weaken in the UK and cannot be dismissed by markets.”
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TD Securities recommend a long 10-Year gilt vs. Bund tactical pre-Budget trade, targeting a move to 170bp, with a stop set at 210bp. They outline several reasons for recommending the position:

  •  “An uncertain roadmap for both the fiscal and monetary side has been weighing heavily on Sterling rates.”
  • “Meanwhile, markets have been rather pessimistic on the euro area growth story.”
  • “Markets are currently pricing the ECB to cut rates to 1.9%, which is below the estimated neutral rate of 2.0-2.5% flagged by ECB members.”
  • “We also believe that Chancellor Reeves is very well aware of the consequences of any big fiscal deviations.”
  • “Data surprises have also started to weaken in the UK and cannot be dismissed by markets.”