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10s30s almost flat ahead of BOE announcement on gilt sales pace

GILTS
  • Gilts hit their highest level of the day of 100.53 after it was confirmed that PM Truss had resigned. Much of that point higher has been reversed but gilts remain around 50 ticks higher on the day at 99.31 at writing due to an earlier move lower lower in expectations of the terminal rate (see 12:40 SONIA bullet).
  • Rishi Sunak is the favourite to be next PM with Smarkets showing his odds at 52% at writing. Mordaunt is second favourite at 22%, with Boris Johnson third at 17%. Wallace who had previously been touted as a unity candidate is down at 4% while Chancellor Hunt has ruled himself out.
  • The question mark now is whether the 31 October fiscal event still goes ahead (with the OBR forecasts and DMO remit revision).
  • The 10s30s curve also continues to flatten today and is currently around 1.9bp, from a peak of around 60bp on Monday. This is the flattest the curve has been since 4 October and the continued flattening comes after the Bank's announcement on Tuesday that it would not sell 20+ year gilts in Q4-22 as part of its active sales programme.
  • At 18:00BST / 13:00ET we will receive the pace and timing for the BOE's active gilt sales in Q4. MNI expects buckets of GBP580-750mln (for more see here).
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