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GILTS: Weakness Resumes As Ratings Agencies Comment On Budget, Lows Intact

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

Gilts under pressure this morning after Moody’s warned on fresh fiscal challenges stemming from the Budget, alongside limited headroom to absorb adverse shocks.

  • S&P also identified a constrained fiscal position but haven’t altered their budgetary forecasts.
  • Futures trade as low as 93.45, bearish technical theme intact.
  • Next support at yesterday’s low (93.18), last 93.63.
  • Yields 2.5-4.0bp higher, curve a touch steeper. Yesterday’s yield highs intact across the curve.
  • Long-dated swap spreads continue to look heavy as yesterday’s late uptick fades alongside this morning’s gilt weakness.
  • 10 and 30-Year swap spreads trade ~1bp off yesterday’s cycle lows.
  • BoE-dated OIS shows 22bp of cuts for next week, 28bp through Dec, 54bp through March and 73bp through June.
  • That compares to 21bp, 30.5bp, 58.5bp and 77.5bp late yesterday.
  • BMO the only sell-side name (that we have seen) to move their call to favour no change at next week’s BoE decision. The 18 that have currently submitted their view to BBG look for a 25bp cut.
  • SONIA futures unwind yesterday’s post-settlement uptick. Last +0.25 to -2.5.
  • Final manufacturing PMI at 49.9 vs. flash 50.3. The survey reaffirmed the idea of uncertainty ahead of the Budget (next month’s survey will provide colour on post-Budget reaction) and "positive signs on the price front".
  • Continued digestion of the Budget and spill over from the U.S. NFP release are set to dominate ahead of the weekend.
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Gilts under pressure this morning after Moody’s warned on fresh fiscal challenges stemming from the Budget, alongside limited headroom to absorb adverse shocks.

  • S&P also identified a constrained fiscal position but haven’t altered their budgetary forecasts.
  • Futures trade as low as 93.45, bearish technical theme intact.
  • Next support at yesterday’s low (93.18), last 93.63.
  • Yields 2.5-4.0bp higher, curve a touch steeper. Yesterday’s yield highs intact across the curve.
  • Long-dated swap spreads continue to look heavy as yesterday’s late uptick fades alongside this morning’s gilt weakness.
  • 10 and 30-Year swap spreads trade ~1bp off yesterday’s cycle lows.
  • BoE-dated OIS shows 22bp of cuts for next week, 28bp through Dec, 54bp through March and 73bp through June.
  • That compares to 21bp, 30.5bp, 58.5bp and 77.5bp late yesterday.
  • BMO the only sell-side name (that we have seen) to move their call to favour no change at next week’s BoE decision. The 18 that have currently submitted their view to BBG look for a 25bp cut.
  • SONIA futures unwind yesterday’s post-settlement uptick. Last +0.25 to -2.5.
  • Final manufacturing PMI at 49.9 vs. flash 50.3. The survey reaffirmed the idea of uncertainty ahead of the Budget (next month’s survey will provide colour on post-Budget reaction) and "positive signs on the price front".
  • Continued digestion of the Budget and spill over from the U.S. NFP release are set to dominate ahead of the weekend.