NORWAY: NGBs Should Be Well Insulated From Increased European Defence Spending

• EUR/USD: $1.0250(E873mln), $1.0280(E910mln), $1.0300(E1.2bln), $1.0320(E1.0bln), $1.0375(E1.0bln), $1.0395-05(E1.4bln), $1.0425-35(E2.4bln)
• USD/JPY: Y152.00($500mln), Y154.00($663mln)
• AUD/USD: $0.6275(A$1.6bln), $0.6335-50(A$896mln), $0.6420(A$1.1bln), $0.6595-00(A$2.5bln)

Gilts remain lower on the day.

• Pressure was seen ahead of the GBP4.25bln auction of the 4.375% Mar-30 gilt, adding to weakness that stemmed from Canada & Mexico’s short-term U.S. tariff reprieve.
• Mixed auction results failed to provide any lasting support.
• Gilt futures as low as 92.45 post-auction before a recovery to 92.55.
• Initial support located at the 20-day EMA (92.11).
• Yields 3.5-6.0bp higher across the curve, 5s lead the sell off
• 10-Year spread to Bunds ~2.5bp wider at 212.3bp, next upside level at the Jan 20 close (213.3bp).
• Hawkish adjustments in GBP STIRs as gilts soften.
• 23.5bp of cuts priced for this week’s BoE decision (our preview will be published later today), 47bp of cuts showing through May.
• We look for 25bp cuts at both of those meetings.
• 78bp of cuts priced through December vs. ~80bp late yesterday.
• We believe that more data is needed before we can give a meaningful view on monetary policy beyond the Bank’s May meeting.
• SONIA futures little changed to -7.5.
• December highs in SFIZ5 remain untested.
• The recent run of dovish repricing may have reached its limit, unless we get a fresh catalyst.
• A limited UK calendar will leave focus on cross-asset cues and tariff-related headlines.