CONSUMER STAPLES: B&M; Q3 results (x2)

Bank of America note that “Asia markets continue to grapple with U.S. policy crosscurrents - specifically "bad" tariff policies vs. "good" policies of Fed easing, as well as tax cuts and deregulation that could boost U.S. import demand.”

• They believe that “U.S. real rates vs. breakevens provide a real-time indicator of the perceived trade-offs and spillover to Asia markets. Related policy trade-offs for Asian central banks are likely to resolve in favour of higher "lines in the sand" for FX, while regional inflation normalization should keep easing cycles on track.”
• This ultimately plays into their ’25 bias to be long USD/Asia FX and received Asia rates/long Asia bonds.

Bund futures are +24 ticks today at 136.19, moving back towards session highs. Early support stemmed from a RTRS sources piece, which flagged the potential for a weaker CNY going forwards.

• A bull cycle in Bund futures remains intact and the pullback from last Monday’s highs appears corrective.
• Initial support lies at 135.75 (Dec 10 low), which shields the 20-day EMA at 135.46.
• German yields are up to 1.5bps lower across the curve.
• EU-bond spreads to Bunds are up to 1bp wider through 5 to 30-year maturities, following the release of the EU's H1-25 issuance plan after yesterday's close. The EU plans to sell E90bln of bonds in H1. This was likely larger (and more front-loaded) than markets had been expecting.
• The 10-year OAT/Bund spread is 1bp wider at ~76.5bps, with President Macron still trying to appoint a Prime Minister that will satisfy France’s fragmented National Assembly.
• Today’s market focus is the November US CPI report and the BoC decision, with the ECB decision headlining tomorrow’s regional calendar. 

Gilt futures flat at 95.22 off lows of 95.07.

• A reminder that Tuesday saw the contract break support at 95.49 and 95.17.
• Support at yesterday’s low (95.13) also breached, switching focus to the November 25 low (94.66)
• Bears ultimately need to break key support at the Nov 18 low (93.40) to reignite downside momentum.
• Yields within -/+1bp of yesterday’s close. 10s & 50s have registered highest levels of December after closes above their 50-DMAs yesterday.
• Spread to Bunds now 222bp, registering a fresh cycle high this morning. Eyes on the mini-Budget ’22 closing high at 227.5bp.
• An uptick in oil prices helped apply pressure, countering the early bid that was driven by speculation surrounding the PBoC weakening the yuan further down the line & read through into inflation.
• Hedging ahead of the GBP4.0bln 4.25% Jul-34 Gilt auction then applied a little more weight.
• The auction itself generated a slightly wider-than-average tail and lower-than-average cover ratio, although there was only limited impact given the cheapening seen ahead of supply.
• SONIA futures flat to +2.0.
• BoE-dated OIS also little changed on the day, showing ~80bp of cuts through ’25.
• Little of note on the UK calendar for the remainder of the day, which will leave focus on cross-market cues and U.S. CPI data.