MNI China Daily Summary: Wednesday, July 3

MNI BRIEF:BOJ Q1 Output Gap Hits 16th Negative Reading In Row

MNI: PBOC Sets Yuan Parity Higher At 7.1312 Weds; -0.34% Y/Y

MNI: PBOC Net Drains CNY248 Bln Via OMO Weds; Rates Unchanged

CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS WEDS

CHINA SETS YUAN CENTRAL PARITY AT 7.1312 WEDS VS 7.1291

MNI: US MBA: MARKET COMPOSITE -2.6% SA THRU JUN 28 WK

US MBA: REFIS -2% SA; PURCH INDEX -3% SA THRU JUNE 28 WK

EZ/UK T-Bill Calendar: 1/3/6-Month UKTB Auction on Friday

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

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Holding Off Morning Lows

GILTS
Bank Of England (BOE) Market NewsHomepageBond Market NewsBulletMarketsFixed Income Bullets

Gilt futures stick to the range established this morning, even with TY and Bund futures registering fresh session lows during the London afternoon.

  • Futures last -22 at 98.49, with bears unable to force a test of yesterday’s low.
  • This morning’s firmer-than-expected UK services CPI data provided the major driver today, while the closure of U.S. cash markets has limited wider market swings.
  • The services CPI data was also firmer than the BoE’s own projections, providing some hawkish risks ahead of tomorrow’s MPC decision.
  • We believe that the data effectively cements a steady 7-2 vote, in favour of leaving interest rates unchanged.
  • Our full BoE preview can be found here.
  • Cash gilt yields are 3-5bp higher, with the post-data flattening bias maintained.
  • BoE-dated OIS shows ~42bp of ’24 cuts vs. closer to 45bp late yesterday.
  • Further forwards, market implied odds of a 25bp cut through the August meeting sit at ~30%, with the first full 25bp move still not fully discounted until the end of the November meeting.
  • SONIA futures are 0.5 to 3.0 lower.
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Gilt futures stick to the range established this morning, even with TY and Bund futures registering fresh session lows during the London afternoon.

  • Futures last -22 at 98.49, with bears unable to force a test of yesterday’s low.
  • This morning’s firmer-than-expected UK services CPI data provided the major driver today, while the closure of U.S. cash markets has limited wider market swings.
  • The services CPI data was also firmer than the BoE’s own projections, providing some hawkish risks ahead of tomorrow’s MPC decision.
  • We believe that the data effectively cements a steady 7-2 vote, in favour of leaving interest rates unchanged.
  • Our full BoE preview can be found here.
  • Cash gilt yields are 3-5bp higher, with the post-data flattening bias maintained.
  • BoE-dated OIS shows ~42bp of ’24 cuts vs. closer to 45bp late yesterday.
  • Further forwards, market implied odds of a 25bp cut through the August meeting sit at ~30%, with the first full 25bp move still not fully discounted until the end of the November meeting.
  • SONIA futures are 0.5 to 3.0 lower.