Bid As U.S. CPI Fallout Extends

Yesterday’s post-U.S. CPI bid extends further, allowing Gilt futures to gap higher at the open, leaving the contract +70 or so. Technically, the contract has breached its 20-day EMA, with little in the way of meaningful resistance observed until the July 3 high (95.55). Cash Gilts see 4.5-6.5bp of richening, with the wings lagging the belly/intermediates.

• The pull lower in UK STIR markets in the wake of yesterday’s U.S. extends further, with the SONIA strip running flat to 11.5bp richer through the greens at typing.
• BoE-dated OIS sees terminal rate pricing threatening a clean break below 6.20%.
• Monthly GDP data was not quite as soft as expected, but that has done little for the space, with broader market dynamics overpowering matters.
• Elsewhere, the BBC has reported that the government could make an announcement as soon as today on whether it will accept the independent pay review recommendations that wages should rise by up to 6.5% for public sector workers (see our previous bullets for more colour on that).
• On the supply side, a syndicated tap of the 0.625% Mar-45 linker will likely be held today.