BoE-Dated OIS Softens Post-Labour Market Data, Weighing On GBP & Supporting Gilts

The gilt bid extends in the wake of the UK labour market data as continued signs of a softening labour market weighs on BoE-dated OIS.

• Gilt futures show through yesterday’s high as a result, but are still a little shy of last week’s best levels, +45 last.
• Cash Gilts sit 2-6bp richer as the curve bull steepens.
• BoE-dated OIS sits flat to ~6bp lower on the day, as the strip flattens. ~20.5bp of tightening is showing for this month’s MPC, while terminal policy rate pricing slips back below 5.65%.
• SONIA futures are flat to +8.0 through the blues, with the greens leading the rally.
• Rate differentials and some broader USD demand weigh on cable, with spot last printing around $1.2480
• Initial minor support in GBP/USD is still at $1.2472, but most market participants will look to $1.2446, last week's base and the lowest print since the 8 June.