Market Commentary

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13th Nov 2012

Split session today amid vague reports in the German press about a supposedly lump sum payment of EUR44bln being paid out to Greece.  Details remained extremely vague at this stage with no official confirmation. Bunds tanked 30 ticks on the back of the news though they stabilized in the afternoon session to close unchanged. In the UK, CPI edged higher to 2.7% from 2.2% prompted by the sharp increase in university fees (added 0.3% to headline rate) which would partly explain the decision by the MPC last week not to continue with QE. The inflation print now provides an uncomfortable backdrop for tomorrow’s Inflation Report.

28th Jan 2013

Another leg lower in core markets today with gilts/bunds once again under heavy pressure on the perceivably large take-up of the LTRO repayment and good data out of the US (durable goods orders up 4.6% from 2%). The euro strip continued to lead the way shredding as much as 14bps mid-session with gilts continuing to outperform bunds (down 70 and 40 ticks respectively). The front end of the stg curve continued to steepen with 2x10s up 3bps helped by better paying on the belly. Tomorrow’s gilt syndication could see a further concession so we keep an eye on selling opportunities.

13th Feb 2013

The pound fell for a third day against all of its 16 major peers, approaching a 15-month low, after BoE Governor King said the UK risks to have above-target inflation and weak growth until 2016 and suggested it will remain above the 2% target three years longer than previously forecasted (it will now peak at 3.2% this summer). King went on to highlight the limits of monetary policy and the need of the government to provide further stimulus through the supply-side and again pointed to little appetite for more QE, a move which has been visible in the last few weeks.. Gilts slumped (future off a point), pushing the 10-year yield to the highest since April feeding through once again to the swap market supporting the steepening of the stg curve as concerns over inflation build up and further weakness in gilts resumes. The strip was under massive selling pressure (greens down 8bps) with 2x10s 7bps steeper. The moves are likely to continue as today’s crucial news point to a future path in terms of MPC policy.