Throwback to more market comments…
17th June 2014
The sterling market opened up on some surprising comments by BoE’s Miles (arguably the most dovish member of the Committee) that he would like to vote for a rate hike before his term end (May 15) and that there was a clear chance of a rate hike before spring next year. He also pointed out that the economy remains robust and that the minutes would show a clear change in opinions within the MPC. The market was heavy in early trading with the front end again under pressure before a disappointing CPI print (1.5% vs exp of 1.7%) provided some support. Afterwards, the market treaded water with no clear momentum until US CPI surprised to the upside (2.1% vs exp of 2%) which took its toll on treasuries with gilts following suit. We close +2bps in 10y gilt with a steeper curve (2x10s +2.5bps). The attention is obviously on tomorrow’s MPC minutes which people expect to be hawkish and clearly shifting towards a rate hike. With the market having now priced a hike in late 14/early 15, a disappointing set of minutes could produce a squeeze higher, particularly in the reds, so it will be interesting to see what the wording is around the rate discussion…
25th March 2014
Another fairly erratic and choppy day, with general strength is equities (FTSE 100 +1.25%) accompanied by strength in bonds, although gilts and short sterling underperformed v EUR and USD. The focus in the UK was on this mornings inflation data, where the headline came is as expected at 1.7% (down from 1.9%) but core CPI was slightly firmer than expected (1.7% v 1.6%). The market was fairly firm in the lead up to the release, given the speed of the fall (from 2.7% back in September) and the firmer than expected print was met with some disappointment, with the greens falling 7-8bp. Another barrage of new issues in EUR along with some dovish ECB speak helped support the market in the afternoon and we ground back to unchanged on the strip, but underperforming EUR by around 3bp. So all in all, very unexciting and uninspiring. We don’t really expect a lot from the rest of the week, we still we will just chug along and thrash about until we hit the next batch of key data next week (PMI’s, payrolls etc). Until then we are happy to sell any decent rallies (above 110.00 in gilt futures and 98.05 in L M6) we are not expecting the big breakout trade just yet. Flow-wise, fairly quiet. Some 2 way in 5y, but the main point of note was good paying in 5y and 6y 3s6s which moved 0.5bp wider.
29th Jan 2014
Another one of these inexplicable rallies caused by worries about Carney’s speech in Edinburgh and the Fed’s decision this evening which pushed the market to the rich levels seen on Friday last week. Nothing really new in Carney’s appearance acknowledging the recovery and again stating that the MPC is in no rush to raise rates. We think the market got ahead of itself, putting too much emphasis on this chatter as nothing new has been published and in particular given that this is the MPC’s only understandable stance given that they will probably heavily modify or entirely remove the forward guidance framework introduced in August. The strip found some very strong support, rallying as much as 11bps going into the speech before retracing down to up 8 on the day. The volatility in EM currencies did not help the general risk-off mood as participants still keep a close eye on developments there as Turkey, Indian, Brazil and SA all raised benchmark interest rates at some point during the day. In the sterling market, there was some obvious flow going through with 3s6s curve being pushed wider in particular in the belly (5y5y is at the highest in 2 ½ years so these looks like interesting levels to put in some tightners). Nothing new expected from the Fed tonight with policy unchanged….