BONDS: EGBS/Gilt Rally Loses Momentum

The rally in EGB and Gilt futures lost a little momentum as NY participants filtered in, but major contracts remain around 40 ticks higher today.

• The morning rally may have partially reflected an intensification in Middle East geopolitics over the weekend, although one would not necessarily expect 10-year peripheral spreads to Bunds to trade tighter in such an environment.
• Bund futures lie just below prior resistance at 133.21, after reaching an intraday high of 133.36. Gilt futures meanwhile were unable to test 98.93 (Jul 18 high), currently +37 today at 98.60.
• OIS pricing for the August BoE meeting now tilts slightly in favour of a 25bp cut (13bps are priced), though 32/41 surveyed by Bloomberg look for such a move.
• UK Chancellor Reeves’ address on public finances is expected around 1530BST. Latest reports indicate that Labour have offered junior doctors a 22% pay rise across two years in a bid to end strike ongoing strike action. 
• Markets continue to have one eye on this week’s risk events (today’s price action could represent associated positioning adjustments), including eurozone flash inflation/GDP, BoJ, Fed, BoE and US quarterly refunding.