Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Fig 1: GBP 5y5y Forward Inflation Swap
Source: MNI/Bloomberg
EGB SUMMARY: Brexit talks dominate EGB markets
Brexit headlines have been the major focus for the market today. UK Prime Minister Boris Johnson's statement that the UK is preparing for an Australia-style deal (which is little more than WTO rules) pushed core fixed income higher, but much of the knee jerk move was retraced as the market took the view that the talk was little move than posturing and hard talk. Macron later continued the hard talk saying that the UK needed a deal more than the EU but Merkel struck a more conciliatory tone stating that compromises would be needed from both sides. Johnson later said that unless the EU was willing to compromise talks would stop now, despite EU diplomats already on their way to the UK to continue talks and EU sources stating that talks would continue next week.
- Elsewhere, a better than expected US retail sales print pushed fixed income lower globally.
- Bund futures are up 0.24 today at 176.14 with 10y Bund yields down -1.8bp at -0.630% and Schatz yields down -0.8bp at -0.781%.
- BTP futures are up 0.67 today at 150.27 with 10y yields down -5.2bp at 0.644% and 2y yields down -4.6bp at -0.367%.
- OAT futures are up 0.29 today at 170.21 with 10y yields down -2.3bp at -0.355% and 2y yields down -1.1bp at -0.716%.
GILT SUMMARY: UK PM Again Raises Prospect of No-Deal Brexit
Focus today has been on the EU summit and the lingering stalemate in trade discussions between the UK and EU. In a bid to add fresh momentum to struggling Brexit negotiations, UK Prime Minister Boris Johnson has argued that preparations must be made for a no-deal scenario. Johnson further stressed that Brussels would need a fundamental change of approach to secure a deal.
- The market has so far largely shrugged off today's developments with equities inching higher and cable flat on the day.
- It is a similar story for gilts, which have lack convincing direction today and now trade around yesterday's close. Last yields: 2-year -0.0657%, 5-year -0.0833%, 10-year 0.1736%, 30-year 0.7234%.
- The Dec-20 gilt future trades at 136.64, near the middle of the day's range (L: 136.47 / H: 136.97).
- Short sterling futures are 0.5 ticks higher in whites/reds and broadly flat in greens/blues.
OPTIONS
EURIBOR OPTIONS: Upside call fly
ERZ0 100.50/100.62/100.75c fly, bought for 2.75 in 2k
EURIBOR OPTIONS: Dec upside buyer
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.