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MNI European Closing FI Analysis: US Election, BoE Eyed

Fig. 1: BTP Spreads Narrow Amid Risk-On Atmosphere


BBG, MNI


EGB SUMMARY: All about Equities

EGBs have have stayed within the morning session ranges, and better offered, with all the action seen in Equities today.

  • Equity screens are flashing green, as investors positions ahead of the US election.
  • German curve has traded flat, leaning bear flatter on the margin, with 5/30s hovering near the low of the session.
  • Peripheral have outperformed core bond and trade tighter on the day, with Greece leading at 4.8bps.
  • All eyes turns to the US election, with Polling results throughout the night.
  • Dec Bund futures (RX) down 17 ticks at 176.07 (L: 175.82 / H: 176.37)
  • Germany: The 2-Yr yield is up 1bps at -0.795%, 5-Yr is up 1.4bps at -0.811%, 10-Yr is up 1.8bps at -0.622%, and 30-Yr is up 1bps at -0.22%.
  • Dec BTP futures (IK) up 29 ticks at 149.79 (L: 149.29 / H: 150)Italy / German 10-Yr spread 3.7bps tighter at 135.1bps
  • Dec OAT futures (OA) down 1 ticks at 170.14 (L: 169.82 / H: 170.25)10-Yr Periphery EGB Spreads:
  • Spanish bond spread down 2.4bps at 73.7bps
  • Portuguese PGB spread down 2.8bps at 70.6bps
  • Greek bond spread down 4.7bps at 152bps

GILT SUMMARY: BoE Still A Focus Alongside US Election

Gilts have traded weaker and the curve has bear steepened as markets adopt a risk-on posture ahead of the US election.

  • Gilt cash yields are 3-4bp lower with the curve 1bp steeper. Last yields: 2-year -0.054%, 5-year -0.0486%, 10-year 0.2556%, 30-year 0.8188%.
  • The Dec-20 gilt future has traded down towards the lower end of the day's range (L: 135.65 / H: 136.09) and last printed 135.69.
  • The DMO earlier sold GBP2.75bn of the 0.125% Jan-28 Gilt and GBP2.0bn of the 1.25% Oct-41 Gilt. A further GBP655.625mn and GBP499.999mln of each respective issue was taken up through the PAOF.
  • The BoE purchased GBP1.473bn of long-dated gilts with offer-to-cover of 2.12x.
  • While the US election takes centre stage this week, the BoE meeting is also a focus, particularly given the ECB's pre-commitment to providing additional stimulus in December.
  • The data slate is light this week with the only releases of note being the final October PMI prints (Services/Composite on Wednesday, Construction on Thursday).


DEBT FUTURES/OPTIONS:

  • RXZ0 174.50/173.50ps 1x1.5, bought for 18.5 in 1.5k (ref 176.11)
  • RXZ0 174.50p, bought for 20 in 2k
  • 0LX0 99.875/100.00/100.125c fly sold at 7 in 3k.
  • BTP/Bund tightener via futures: IK 2,742 at 149.56 v RX 2,031 at 176.08

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