EMISSIONS: Funds Further Cut Bullish Bets in EUAs For Fourth Week

Hargreaves Lansdown highlight increased gilt trading activity amongst their clients in January.

• When compared to January 2024, they note that “the number of trades and amount of assets invested this January were 75% higher. Both figures were much higher than December 2024 too, with the number of trades seeing a 93% increase.”
• The January figures are the highest levels they have witnessed since ’21, with the early January spike higher in yields and maturity of the 0.25% 31 January 2025 gilt cited as the key drivers of activity.
• A reminder that the 0.25% 31 January 2025 gilt was particularly attractive to retail investors, given its low coupon status and UK tax laws.
• Hargreaves Lansdown suggest that “with investors aware that the gilt was going to mature very soon, it’s likely many sold ahead of maturity and reinvested in other gilts, given the spike in yields.”
• Looking forwards, they expect February to be “another popular month for gilt purchases, largely linked to the maturity of the gilt on 31 January - many clients will have received their maturity payment last week and given continued elevated yields, reinvesting into other gilts may be attractive.”
• Note that we do not have Hargreaves Lansdown’s gilt trading volume to hand, but thought the above may be of interest given wider discussions surrounding the maturity of the 0.25% 31 January 2025 gilt and retail investor activity.

A flat start for gilts, futures last +3 at 93.23 (93.13-32 range).

• The short-term bullish cycle in the contract extended last week, initial support and resistance located at 92.50 & 94.35, respectively.
• Yields 0.5-1bp higher across the curve.
• 2s10s and 5s30s ~2.5bp and ~5bp off respective ‘25 closing highs.
• Goldman Sachs note that “gilts have continued to rally since the sharp sell-off in early January and are the best performer of the last few weeks. The extent of rally may mean gilts take a breather in the short run; however, we continue to expect a decline in Gilt risk premium over the coming year, and continue to recommend 10s30s flatteners.”
• Little of note on the UK calendar today, with comments from BoE Governor Bailey & MPC member Mann (after her dovish pivot) eyed on Tuesday.
• This week’s DMO issuance comes via a syndication of the new 4.50% Mar-35 gilt (we expect this to price tomorrow, pencilling in a size of GBP8.5-10.0bln) and GBP1bln of the 0.625% Mar-45 I/L line (Wednesday).

ECB-dated OIS have held onto the dovish repricing seen into Friday’s close, with US President Trump’s weekend tariff threats on steel/aluminium imports keeping the pressure on EUR implied rates. 87bps of ECB easing are priced through year-end at typing.

• OIS continue to fully price a 25bp cut in March, with 19bps of sequential cuts priced through the April and June decisions. 25bp cuts at the next three gatherings would bring the deposit rate to 2.00%, in the middle of the ECB’s heavily caveated 1.75-2.25% neutral range.
• In a podcast with Bloomberg released Friday, ECB Chief Economist Lane described neutral as a “hypothetical conjecture”, as it assumes a shock-free economy. In Lane’s words: “What's the probability the world won't face any more shocks in the next year?”.
• Euribor futures are -0.5 to +1.5 ticks through the blues, with a light flattening bias seen.
• The February Sentix survey is due at 0930GMT, but isn’t usually a market mover. That leaves focus on ECB President Lagarde’s appearance at the EU Parliament at 1400GMT.