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10s30s continues to recover; but remains below pre-fiscal statement range

GILTS
  • Gilts saw a weak opening and futures have again already been in a 100 tick range this morning, hitting a low of 98.00 (yesterday's close was 99.40) and at present trading at 98.49.
  • There has been further steepening of 10s30s this morning as the long-end underperforms.
  • Note that 10s30s had traded in a 20.5-43.4bp range between 3 August and the government's "Growth Plan" (fiscal statement). At writing we are back to +18.9bp having reversed the inversion. This is still still a little below the pre-fiscal announcement range, but well above the -33.2bp lows seen last week.
  • These levels will probably start to make the Bank of England a bit more comfortable, and they will likely be hoping that they can continue to only make small "backstop" interventions in the daily long-dated purchase operations - allowing them to be ended next week as originally planned - hopefully in their eyes with minimal market impact.
  • Today, there will be focus on the 10-year gilt auction (particularly in the light of yesterday's 40-year auction seeing the longest tail since November 2018). As well as any further comments on further fiscal policy or any suggestions of dates of the Medium-Term Fiscal Plan.
  • Liz Truss is due to speak at the Conservative Party conference around 11:00BST according to Politico.
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