GILTS: BofA: WAM Of Debt Lengthens As Buyers Of Long Gilts Disappear
Mar-19 08:58
Bank of America write “the non-bank private sector bid for Gilts - absent for thirteen years through the QE era - has come back with a vengeance. But in our view that is wholly misleading. Some of it reflects "reshoring" of pension holdings from overseas accounts, and much of it reflects replacement hedges”.
- The don’t think the flow is “sustainable, because the so-called "pensions journey" for corporate UK is reaching its end. The DB pensions liability has halved, from £2tln to £1tln, and 80% of assets are bonds or other hedging instruments. And scheme membership is falling (and aging) quickly. The DMO will likely need to urgently alter the distribution of Gilt supply. The weighted average maturity (WAM) of the officially outstanding Gilt market might be drifting lower, but that for the national debt as a whole is actually lengthening, as QT terms out the state's liabilities”.
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RATINGS: Austria Outlook Moved To Stable From Positive By S&P On Friday
Feb-17 08:56
Rating reviews of note from after hours on Friday include:
- Fitch affirmed Czech Republic at AA-; Outlook Stable.
- Moody's affirmed Switzerland at Aaa; Outlook Stable.
- S&P affirmed Austria at AA+; Outlook revised to Stable from Positive.
- Morningstar DBRS confirmed Latvia at A; Stable Trend.
- Ireland saw unchanged ratings action from Moody’s (current rating: Aa3; Outlook Positive) and Scope Ratings (current rating: AA; Outlook Stable), following periodic monitoring reviews.
- Sweden saw unchanged ratings action from Scope Ratings (current rating: AAA; Outlook Stable) following a periodic monitoring review.
EURIBOR OPTIONS: Call spread buyer
Feb-17 08:37
ERM5 98.25/98.37cs, bought for 0.25 in 17k.
GILTS: Futures Gap Lower At The Open; Feb 12 Low Intact For Now
Feb-17 08:33
Gilt futures gap lower at the open, catching up with weakness in core EGBs and posting fresh session lows of 92.53 at typing (-77 ticks today).
- Zooming out, a bull cycle is still in play and the pullback from the Feb 6 high appears corrective for now. The Feb 12 low at 92.31 remains intact, while firm resistance is the Feb 10 high at 93.71.
- The cash curve has bear steepened, with yields 5-7bps higher. 10-year yields are up to 4.57%, just short of last Wednesday’s high of 4.58%. The 10-year Gilt/Bund spread has widened 1bp to 208bps.
- For more colour on weekend news and this week’s calendar, see our morning STIR note above.
