GILTS: Early Ranges Intact, Awaiting Cues

• From the 12 sellside Spring Statement previews that we have read, expectations for the gilt remit range from GBP292bln through to GBP321bln, with a median expectation of GBP303bln (which we estimate is not far off where 2024/25 will end up due to the overfunding from the large syndications towards the end of the current fiscal year).
• See the table below for full estimates.
• Short issuance is expected to be larger than in the current fiscal year. Short issuance exceeded the Autumn Budget forecast, largely due to the tenders for the 0.125% Jan-26 gilt (which will mature in the upcoming fiscal year and hence has added to the funding needs for2025/26). Only the lowest estimates expect short issuance at similar to the current fiscal year (around GBP100bln) with estimates ranging up to GBP120bln. The median estimate equates to 36.1% of total issuance – which isn’t that far from the initial 35.9% seen last March. But we note that against expectations, the DMO reduced the proportion of short issuance intended at the time of the Autumn Budget to 34.6% (although as we note with the tenders we estimate the outturn around 36.5%). With the DMO being flexible with tenders (and including the short-end of the curve for potential tenders) at least some of the unallocated bucket could be used for tenders.

• On the commodity front, a clear uptrend in Gold remains intact and the yellow metal is holding on to the bulk of its recent gains. Last Thursday’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a 2.618 projection of the Nov 14 - Dec 12 - 19 price swing. Note that moving average studies remain in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2970.1, the 20-day EMA.
• In the oil space, despite recent gains, a bearish trend condition in WTI futures remains intact. However, a key pivot resistance at $69.12, the 50-day EMA, has been pierced and the contract is holding on to its recent highs. A clear breach of this hurdle would strengthen a bullish theme and open $70.98, the Feb 25 high. For bears, a reversal lower would expose the bear trigger at $64.85, the Mar 5 low. Clearance of this level would resume the downtrend and open $63.73 next, the Oct 10 ‘24 low.

Gilts trade away from session highs alongside wider core FI, as the largely CPI-driven bid fades.

• Futures have unwound more than half of the early rally, last trading at ~91.20 vs. session highs of 91.58.
• As mentioned previously, our technical analyst notes that the short-term outlook for the contract remains bearish.
• Yesterday’s low (90.93) protects key support at the Mar 6 low (90.71).
• Key short-term resistance has been defined at 93.01, the Mar 20 high.
• Yields little changed to 5bp lower, 4-5bp off session lows.
• Curve holds steeper on the back of the dovish BoE repricing that followed the CPI data.
• Outperformance vs. Bunds holds, but spreads are back from session tights. 10-Year UK/German spread last ~193bp.
• Long end swap spreads biased tighter, perhaps reflecting profit taking ahead of the Spring Statement in light of the recent widening.
• ~46bp of BoE cuts priced through year-end vs. ~40bp at the close yesterday and ~48bp at one point today
• Our full preview of the Spring Statement is here.