OIL PRODUCTS: China’s Automobile Market Sees Modest Jan Performance: OilChem

Gilts are off session highs, with global inputs dominating thus far.

• Core global FI markets rallied as Chinese tech firm DeepSeek’s AI advances generated questions surrounding U.S. tech dominance, as well as promoting worry surrounding the high levels of planned and already deployed capex in microchips.
• Futures +48 at 92.39 last, compared to session highs of 99.60.
• Yields 2-5bp lower, 10s outperform.
• Bulls have been unable to force meaningful breaks of last week’s yield lows.
• Spread to Bunds 0.5bp wider at 206.5bp.
• BoE-dated OIS price 70bp of cuts through year-end after showing ~71.5bp at one point this morning. Last week’s dovish extreme of ~72.5bp over that horizon intact.
• We still look for cuts in February (market prices 22.5bp of cuts over that horizon) and May (~42bp of cumulative cuts showing through that meeting).
• SONIA futures flat to +6.5. SFIM6-U7 have breached last week’s highs.
• Supply provides the highlights of this week’s limited UK calendar.
• The DMO is looking to hold a tender of a sub-5-Year gilt on Thursday. We believe that the 0.125% Jan-26 gilt is the most likely candidate for issuance via that tender and pencil in a GBP1.0-2.0bln size for the transaction (greater colour surrounding our thoughts can be found in an earlier bullet).

10yr Weekly Option, Expiry Friday:

• TY 110c, bought for '06 in 15k.