GILTS: Sell Off In Tsys Weighs
The beta to Tsys continues to weigh on gilts, limiting any recoveries to shallow at best.
- Still, bears haven’t managed to force a break of yesterday’s low in futures as of yet, leaving key support at Wednesday’s low (89.99) some distance away.
- Yields are 5-10bp higher, with the early curve steepening morphing into flattening.
- Increased correlation to risk assets continues to reduce the hedging appeal of gilts, while the UK’s fiscal fragility and instances of limited liquidity further out the curve point to continued headwinds for UK paper in the near-term.
- BoE-dated OIS 0.5-12bp more hawkish on the day across ’25 meetings, with weakness in the long end adding to the early GDP data-driven move.
- 24bp of cuts priced for May, 32.5bp through June, 51bp through August and 78bp through year-end.
- We still look for a cut in May at this stage, with this morning’s firmer-than-expected GDP reading not detracting from that view.
- Next week’s UK calendar will be headlined by the labour market (Tuesday) and CPI (Wednesday) data, expect our customary detailed previews ahead of those releases.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.219 | -23.8 |
Jun-25 | 4.133 | -32.4 |
Aug-25 | 3.948 | -50.8 |
Sep-25 | 3.855 | -60.2 |
Nov-25 | 3.718 | -73.9 |
Dec-25 | 3.679 | -77.8 |
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FOREX: FX Exchange traded roll update
FX Exchange traded roll pace (updated).
- EUR: 50%.
- GBP: 38% (below pace).
- JPY: 50%.
- CHF: 36%.
- CAD: 43% (below pace).
- AUD: 45%.
- NZD: 46% (above pace).
- SEK: 54% (above pace).
- NOK: 47%.
EURIBOR OPTIONS: Large call fly
ERM5 97.6878/97.75/97.875c fly, bought for -0.5 in 15k.
EQUITY TECHS: E-MINI S&P: (H5) Has Entered Oversold Territory
- RES 4: 6178.75 High Dec 6 ‘24 and key resistance
- RES 3: 6166.50 High Jan 19
- RES 2: 5963.30 50-day EMA
- RES 1: 5757.75/5880.10 High Mar 10 / 20-day EMA
- PRICE: 4618.50 @ 13:47 GMT Mar 13
- SUP 1: 5534.00 Low Mar 11
- SUP 2: 5523.00 Low Sep 11 2024
- SUP 3: 5499.25 Low Sep 9 2024
- SUP 4: 5444.55 76.4% retracement of the Aug 5 - Dec 6 ‘24 bull leg
A bear threat in S&P E-Minis remains present and fresh cycle lows this week reinforce current conditions. MA studies are in a bear-mode set-up and this highlights a dominant downtrend and bearish market sentiment. Sights are set on the next important support at 5499.25, the Sep 9 2024 low. Note that the short-term trend condition is oversold, a corrective bounce would allow this set-up to unwind. Firm resistance to watch is 5963.30, the 50-day EMA.
