TD's Pre-Budget Playbook

Ahead of the DMO remit TD Securities look for FY 24/25 gilt supply of £240-260bn.

• They note that “bear flattening in 5s30s has come with re-steepening of the SONIA strip. Outright triggers to play curve steepeners are lacking with the hawkish stance from central banks.”
• “March could see additional support, net supply remain close to flat on back of linker maturities.”
• “Tactically we favour being paid in 5s15s30s fly/5s10s30s. This supports the view of increased supply in medium sector.”
• “2s5s Gilt curve is not moving in tandem with the bear steepening in the SONIA strip. Seasonality is also supportive for front-end swap spreads.”
• “Heading into the budget, the front end is likely to follow the tightening move in long-end (especially with QT comments from Ramsden). We still look for more potential in short 30y Gilt spreads trade. Cross-market 5y EUR spread seems cheap vs. GBP.”
• “Gilts have managed to outperform both Bunds/ USTs in the front end of the curve. We still see value in holding longs in 30y Gilts vs. Bunds or 10y Gilts vs. CAD.”