SEK: Underperforming G10 But USDSEK Rally Considered Corrective
Apr-25 12:14
- Today’s 1.0% rally in USDSEK is considered corrective, with a move above the 20-day EMA at 9.8043 required to undermine a bearish technical theme. The pair reached a high of 9.7250 earlier, but has since moved back to 9.6890. Support remains at the Apr 22 low of 9.4704. Next week’s data calendar is heavy. We think the soft data (e.g. April Economic Tendency Survey and manufacturing PMI) will be more important to watch than lagged hard data (e.g. Q1 GDP indicator and March retail sales).
- Early month-end flows may be playing a role, with SEB noting a "relatively large selling need in SEK this April of -0.4%, where the most pronounced need is to buy USD/SEK".
- Although the 3M 25D USDSEK risk reversal remains positive at 0.47 points, the vol premium of calls over puts is close to multi-year lows, indicative of waning relative demand to hedge USD upside in the current geopolitical environment.
- EURSEK has consolidated the move away from year-to-date lows of 10.6652 on April 3, but has found solid resistance at the 50-day EMA of 11.0418 today. The 3m risk reversal has ratcheted higher since April 4, currently at 0.93 points, with the EUR benefitting from this month’s rotations out of the USD.
- Riksbank’s Breman did not provide clear policy signals in remarks this morning. Although the Board seems content with policy rates staying at 2.25% for now, the risk appears tilted towards more easing later this year.
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OUTLOOK: Price Signal Summary - Key Support In Gilts Remains Exposed
Mar-26 12:10
- In the FI space, Bund futures are holding on to the bulk of their recent gains. Resistance remains intact and - for now - the latest move higher is considered corrective. The move higher has allowed an oversold trend condition to unwind. Initial firm resistance to watch is seen at 129.41, the Jan 14 low. A recent impulsive sell-off reinforced a bear theme and signals scope for an extension towards 126.28 next, a 2.618 projection of the Feb 5 - 19 - 28 price swing. Further out, 126.00 is also within range.
- The short-term trend outlook in Gilt futures remains bearish and recent gains appear to have been a correction. This week’s move lower reinforces a bear theme. Key short-term resistance has been defined at 93.01, the Mar 20 high. A break of this level is required to highlight a bullish condition. For now, attention is on support at 90.71, the Mar 6 low and bear trigger. A break of this level would resume the downtrend.
UK FISCAL: Remit expectations ahead of the Spring Statement (2/2)
Mar-26 12:05
- Medium-dated issuance is expected to see a larger increase, with the median estimate at GBP97bln. This would represent 32.4 % of issuance (30.9% last March, 31.3% outturn when including the upsized syndications). We would once again expect two 10-year syndications in the fiscal year.
- Long-dated issuance is expected to fall back by most with median estimates at GBP51bln which makes up 16.4% of total issuance (down from the 18.5% target a year ago and 20.7% outturn). This bucket has the potential to be upsized through syndications fairly substantially, however. We would pencil in at least 3, potentially 4 long-dated syndications, but see little issuance longer than 30-years.
- Linker issuance is also expected to reduce, to a median of GBO30.5bln (10.0% of total). This would be down from the originally planned 10.9% (11.5% outturn).
- A number of analysts are also arguing for a larger-than-usual unallocated bucket. Estimates here range from GBP10.5bln through to GBP28.0bln with the median expectation at GBP16.6bln. This would be considerably higher than the GBP10bln seen in the 2024/25 fiscal year.
- T-bill estimates range from an unchanged stock to the end 2024/25 level to a GBP11bln increase, with the median at GBP5bln. NS&I funding is expected to remain broadly consistent with 2024/25’s GBP9.5bln level.
UK FISCAL: Remit expectations ahead of the Spring Statement (1/2)
Mar-26 12:03
- From the 12 sellside Spring Statement previews that we have read, expectations for the gilt remit range from GBP292bln through to GBP321bln, with a median expectation of GBP303bln (which we estimate is not far off where 2024/25 will end up due to the overfunding from the large syndications towards the end of the current fiscal year).
- See the table below for full estimates.
- Short issuance is expected to be larger than in the current fiscal year. Short issuance exceeded the Autumn Budget forecast, largely due to the tenders for the 0.125% Jan-26 gilt (which will mature in the upcoming fiscal year and hence has added to the funding needs for2025/26). Only the lowest estimates expect short issuance at similar to the current fiscal year (around GBP100bln) with estimates ranging up to GBP120bln. The median estimate equates to 36.1% of total issuance – which isn’t that far from the initial 35.9% seen last March. But we note that against expectations, the DMO reduced the proportion of short issuance intended at the time of the Autumn Budget to 34.6% (although as we note with the tenders we estimate the outturn around 36.5%). With the DMO being flexible with tenders (and including the short-end of the curve for potential tenders) at least some of the unallocated bucket could be used for tenders.
