Also Rally On Broader Risk-Off Feel, Futures Test Initial Resistance

Gilts rally on the previously flagged weakness in crude oil and equity markets, taking the contract through yesterday’s highs, testing resistance at the May 23 high (97.44) at typing.

• An extension through that level would pose a deeper risk to bears and expose the May 17 high (98.12).
• Cash gilt yields are flat to 2.5bp lower, with a light flattening bias.
• The rally in gilts lags core/semi-core EGBs across the curve this morning.
• SONIA futures follow gilts, last little changed to +4.0 on the day, with the recovery from last week’s cycle lows in ’24 & ’25 contracts extending further.
• BoE-dated OIS moves to price ~37bp of ’24 cuts vs. ~35bp late yesterday/early today.
• UK headline flow continues to be dominated by political matters, ahead of today’s initial Sunak-Starmer TV debate (21:00 London).
• Labour continues to hold a huge lead in the opinion polls, while Nigel Farage has announced his intentions to run for a seat, leading the Reform UK Party.
• BRC like-for-like sales saw a much shallower than expected rebound in May.
• GBP2bn of 4.00% Oct-63 gilt supply is due today, with little UK data/event risk noted ahead of the previously flagged political debate.