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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: Breaking Out Of Recent Range
BBG, MNI
EGB SUMMARY: Bunds move above yesterday's highs
After a fairly comfortable day trading within yesterday's range, core fixed income including Bunds has broke above yesterday's highs shortly after the US equity open, despite only a slightly risk-off tone to US markets. European equity markets have underperformed throughout the day and peripheral spreads have generally widened today, too. BTPs have been the notable exception as they continue to outperform.
- The EU Commission announced today that the EUR17bln raised through the sale of SURE bonds has now been disbursed with EUR10bln going to Italy, EUR6bln to Spain and EUR1bln to Poland.
- Focus remains on the ECB meeting later this week where an extension to the PEPP programme is likely to be discussed but probably not acted upon until December.
- Bund futures are up 0.54 today at 175.84 with 10y Bund yields down -2.8bp at -0.609% and Schatz yields down -1.2bp at -0.773%.
- BTP futures are up 0.35 today at 149.69 with 10y yields down -3.7bp at 0.700% and 2y yields down -0.9bp at -0.374%.
- OAT futures are up 0.46 today at 169.82 with 10y yields down -2.7bp at -0.327% and 2y yields down -1.7bp at -0.715%.
GILT SUMMARY: Bull Flattening
Following a quiet start marked by sideways trading during the morning session, gilts started to rally towards midday.
- The curve has bull flattened with particularly sharp price action at the longer end. Cash yields are up to 7bp lower on the day. Last yields: 2-year -0.0442%, 5-year -0.0453%, 10-year 0.2416%, 30-year 0.7939%. The 2s30s spread is 5bp narrower.
- The Dec-20 gilt future trades at 135.86, near the top end of the day's range (L: 135.34 / H: 135.91)
- The DMO earlier sold GBP1bn of the 1.625% Oct-71 Gilt and GBP3.25bn of the 0.125% Jan-24 Gilt. A further GBP249.999mn and GBP260.742mn, respectively of each issue was purchased through the PAOF. Tomorrow the DMO will sell GBP2.5bn of the 0.375% Oct-30 Gilt.
- The BoE purchased GBP1.473bn of long-dated gilts with offer-to-cover of 1.82x.
- Thursday will see the release of money supply, consumer credit and mortgage approval data for September.
DEBT FUTURES/OPTIONS:
- LH1 99.875/100.00/100.125 c1x3x2 bought for 2.75 in 4k
- 0LM1 100.125/100.25/100.375 call fly bought for 1.25 in 2k (v 99.96, 4d)
- 2RX0 100.50/100.375 put spread bought for 1 in 3.9k
- OEZ0 136.00/136.50 c/s v 135.25/134.75 p/s, bought for 0.5 in 1k
- DUZ0 112.30/20 put spread bought for 1.5 in 3.5k
LOOK AHEAD:
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
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.
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