A Heavier Start, Familiar Levels Remain In Play

Gilt futures operate ~40 ticks below settlement levels at typing, just off the base of the early 100.01-110.23 range.

• Technical parameters haven’t moved on from yesterday.
• Gilt futures maintain a softer tone and the contract is trading closer to its recent lows. Last week’s move lower resulted in a break of the 20-day EMA, suggesting scope for a continuation of the bear cycle near-term. This has exposed support at 98.97, the Dec 6 high. On the upside, initial firm resistance to watch is at 101.98, the Jan 3 high. A break would ease bearish pressure., with a light steepening bias seen.
• Cash gilt yields are 2-4bp higher across the curve.
• SONIA futures & BoE-dated OIS are little changed vs. pre-gilt open levels.
• We get the first round of this week’s double gilt supply from the DMO later today via GBP2.25bln of the 20-year 4.75% Oct-43 line. This will be the first reopening of the gilt that was launched via syndication in November for GBP7.0bln (from books of GBP93.6bln). Outside of that syndication, the last time a gilt with a residual maturity of 17-23 years was sold was October 2021. The closest comparable reopening in 2023 was probably for the 1.125% Jan-39 gilt in August (which saw a bid-to-cover of 2.51x and tail of 0.8bp).