RUSSIA: RUB, Stocks Surge Following Trump-Putin Call, CBR Rate Decision Eyed

Gilts add ~100 ticks in early trade, printing either side of 90.00, before fading back to 89.90.

• Softer-than-expected CPI data the driver, with markets ignoring the fact that the downside surprise was mostly driven by volatile components.
• The recent increase in short positioning in futures (flagged in recent days) will be contributing to the move as well.
• Bearish trend in futures intact, although today’s data puts that at risk. Initial support and resistance located at 88.96 and 90.31, respectively.
• Yields 4.5-8.0bp lower, curve bull steepens.
• 5s30s on track for a fresh cycle closing high at current levels, above 86bp.
• Early dovish move in STIRs extends a little further, with markets pricing in 50bp of BoE cuts through ’25 at one stage before fading back to ~48bp at typing.
• GBP4bln of 4.25% Jul-34 gilt supply due this morning.
• Comments from BoE Taylor eyed later (16:30 London), greater colour on that provided in the pre-gilt open STIR bullet.

Some highlights from Riksbank Executive Board member Bunge's speech at Bopol Live:

• "The interest-rate sensitive parts of the economy are still weaker than normal, but we see signs that we are close to a turnaround"
• "We need to boost consumption to strengthen the economy. Stronger economic activity is important in itself, but also a necessary condition for inflation to stabilise close to the target"
• *"Our forecast is that it may be cut one more time during the first half of 2025. As I argued at the December monetary policy meeting, I judge that it is better to do so in the near term rather than to wait"
• "There are a number of clouds of uncertainty obscuring the outlook for inflation and economic activity"

Front-loading of interest rate cuts is in line with Bunge's view from the December minutes: " I can imagine that the policy rate will probably be cut again when we meet after the festive season. However, as we note in the draft report, it is also important to consider the delay existing between rate cuts and their effects on the economy"

Bunge's speech also highlighted vulnerabilities in the Swedish economy arising from high private sector debt levels. Commenting on a proposal for more generous credit rules for mortgages, she noted that the Riksbank will provide a fill response in due course, but also noted concern that the proposed changes could increase financial risks, both for households and for banks: "Making it easier to borrow will not solve long-term housing market challenges".

FX Exchange Weekly traded Option, expiry Friday, covers the US CPI, IJC, Retail Sales and IP, and the rest of the European Final CPIs.

• EURUSD (expiry Friday) 1.0675c , bought for 0.00020 and 0.00025 in 2k.

Underlying is slightly higher than the spot at 1.0341.