GILTS: Limited Rally Following U.S. Data

Norges Bank is unanimously expected to remain on hold at tomorrow’s meeting, while continuing to guide for a rate cut in March. As such, markets are well priced for an uneventful outcome, with overnight ATM NOKSEK vols of 7.5 below prevailing levels ahead of the September, November and December 2024 decisions. An overnight NOKSEK straddle would thus require just a 30 pip (~0.3%) swing to breakeven. 

• On the downside, key support remains at 0.9717 (Jan 2 low). Clearance of this level would undermine the corrective rally which began at the start of this year and expose trendline support drawn from the August 2024 low at 0.9667.
• The Jan 15 high at 0.9859 represents initial resistance, coinciding with the 61.8% retracement of the Nov 22nd – Dec 20th bear leg.
• We view the risks to tomorrow’s decision as slightly tilted in a hawkish direction, with the weak exchange rate, higher commodity prices and increases in global implied policy rates all hawkish inputs into Norges Bank’s framework.
• One area of interest amongst analysts ahead of the decision is whether the weak exchange rate will return to having a prominent role in the policy statement’s risk assessment.
• MNI’s preview of the decision is here.

• Reoffer price 99.75 to yield 3.18%
• Spread set previously at 3.45% Oct-34 Obli (mid) +5bp
• Guidance was +8bp area then revised to +6bp area (+/1bp WPIR)
• Size: E15bln (MNI had expected E10-15bln)
• Books in excess of E155bln
• Maturity: 30 April 2035
• Coupon: 3.15%, Short first
• ISIN: ES0000012O67
• Settlement: 29 January 2025 (T+5)
• Bookrunners: BBVA, CACIB, DB (B&D/DM), JPM, MS, SANTANDER
• Timing: FTT Immediately

From market source / BBG

SFIZ5 95.50/96.00/96.50c fly, bought for 12.5 and 12.25 in 15k.