CREDIT SUPPLY: BPER Banca FV (EUR 500m WNG 6NC5 SNP)

Gilts initially rally in sympathy with price action in wider core global FI markets since Friday’s close, before the headlines surrounding a dovish tweak in the Chinese monetary policy stance were accounted for.

• That leaves gilt futures around late Friday levels last +16 at 95.82.
• Initial support and resistance at 95.49/96.18.
• A bullish corrective cycle in the contract remains in play and recent gains reinforce the short-term condition
• Yields little changed across the curve.
• Gilts 1bp tighter vs. Bunds, last 215.5bp, with the 220bp level continuing to cap, while relative fundamentals limit pullbacks.
• SONIA futures off highs alongside gilts, last flat to +3.0, in line with/a little below pre-gilt open levels.
• BoE-dated OIS still pricing ~80.5bp of cuts through December ’25.
• Comments from BoE’s Ramsden due at 13:00 London (more on that later).

SX5E (17th Jan) 4550/4400ps, bought for 3.3 and 3 in 6k.

While we concede that Chinese policy settings have already turned much more supportive in ’24 (albeit at a slower pace than many called for), recent policy moves and today’s dovish tweak in the monetary policy stance (to “moderately loose”) show that the powers that be are much more serious about countering the economic headwinds that the country faces as it looks to meet its economic targets.

• As ever, the impact will be needed to be assessed via the data seen in the coming months, as opposed to the knee-jerk risk-positive market reaction (Hang Seng +2.76% at the close, China 10-Year yields to fresh cycle lows).
• The Politburo’s change in tone comes ahead of this week’s CEWC.
• Expect the change in tone to filter through the communique deployed at that event.
• The gathering will see Chinese policymakers discuss policy settings and the country’s ‘25 GDP growth target (’24 target was “around 5%”).
• We could see source reports covering the GDP growth target and fiscal support measures/budget deficit around the event.
• However, China’s annual numerical economic targets are not formally released until March.
• All else equal, the monetary policy stance tweak and fiscal language used today points to reduced odds of a meaningful move lower in the country's GDP growth target for '25 and present upside risks to fiscal spending.