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GILTS: Lead The Sell Off, Fresh Wides Vs. Bunds

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

{GB} GILTS: Gilts sell off, with core global FI pulling back from yesterday’s highs.

  • Futures trade at 98.65, bearish technical threat intact despite yesterday’s recovery.
  • First support at Monday’s low (98.30), while initial resistance comes in at the 20-day EMA (99.38).
  • Yields 4-5bp higher.
  • Widener flow in gilts vs. Bunds likely helping the move as well, with the 10-Year gilt/Bund spread through the Sep ’23 closing high, printing near ~192bp
  • There isn’t much in the way of technical areas of interest between prevailing levels in the spread and 200bp, with the round number protecting the July & August ’23 closing highs.
  • Dovish ECB repricing has driven most of the widening seen in recent sessions.
  • Meanwhile, the stickier short-term inflation outlook and relatively resolute economic performance in the UK factors in on the gilt side.
  • The BoE's reluctance to firmly commit to follow up rate cuts and the risk of increased UK issuance are also impacting the spread.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

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{GB} GILTS: Gilts sell off, with core global FI pulling back from yesterday’s highs.

  • Futures trade at 98.65, bearish technical threat intact despite yesterday’s recovery.
  • First support at Monday’s low (98.30), while initial resistance comes in at the 20-day EMA (99.38).
  • Yields 4-5bp higher.
  • Widener flow in gilts vs. Bunds likely helping the move as well, with the 10-Year gilt/Bund spread through the Sep ’23 closing high, printing near ~192bp
  • There isn’t much in the way of technical areas of interest between prevailing levels in the spread and 200bp, with the round number protecting the July & August ’23 closing highs.
  • Dovish ECB repricing has driven most of the widening seen in recent sessions.
  • Meanwhile, the stickier short-term inflation outlook and relatively resolute economic performance in the UK factors in on the gilt side.
  • The BoE's reluctance to firmly commit to follow up rate cuts and the risk of increased UK issuance are also impacting the spread.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

Keep reading...Show less