A Little Softer, Outperforming Bunds

The slightly firmer-than-expected Eurozone core CPI release and presence of the July-29 gilt auction apply some pressure in recent trade, although gilts still outperform Bunds across the curve.

• Futures remain comfortably within yesterday’s range, last -20 at 96.29 (96.24-96.50 range).
• The contract’s bearish technical backdrop remains intact. The recent recovery has not threatened initial resistance levels, while moving average studies have crossed into bear mode.
• Initial meaningful support is seen at the April 25 low (95.36), some distance from prevailing levels.
• Cash gilt yields are ~1bp higher across the curve on the day.
• Note that the upsizing of the gilt auction (coinciding with the launch of a new line) skews the cover ratio lower when looking at comparables, while the tail was wider than that seen at the previous 5-Year offering (as we suggested ahead of the auction).
• SONIA futures generally track gilts lower, last +0.5 to -3.5 through the blues.
• BoE-dated OIS shows ~43bp of ’24 cuts vs. ~46bp early today.
• The BoE will publish its quarterly APF report at 12:00 London.