Bull Steepening Extends As Equities Move Lower

Gilts are off session highs but still firmer on the day.

• Weakness in European equity benchmarks drove the early bid.
• Futures last +28 at 99.77 vs. highs of 99.88.
• Initial resistance remains some distance away at the August 6 high (100.43), although the recent pullback is deemed corrective, with initial support at the Jun 21 (99.23) high untested.
• Yields are 2-6bp lower.
• Recent curve steepening theme maintained, 2s10s above 30bp for the first time since Q422, while 5s30s is ~7bp off YtD highs.
• The delivery of the first BoE rate cut and broader market sentiment have allowed the steepening to extend further over the last week.
• STIRs see a dovish move alongside the rally in the long end.
• SONIA futures flat to +7.5.
• BoE-dated OIS shows 10bp of cuts for September and ~48bp of cuts through year end.
• The UK calendar is very limited until next week’s CPI & labour market reports, leaving broader risk sentiment at the fore.