Bull Steepening Holds, Off BRC-Inspired Bests

The early bull steepening on the curve holds, aided by the previously covered softening in the BRC shop price index.

• To recap, the lower tier local data saw monthly food prices falling for the first time in 2 years and the headline index sitting at the lowest level Since Sep ’22, still a little above 6% Y/Y.
• Gilts are off best levels as crude oil and global equity index futures recover from lows, last showing unchanged on the day.
• Cash gilts are 0.5-2.5bp richer.
• 2s10s sit at the least inverted level seen since June (-41bp), while 5s30s have hit the steepest level seen since May showing around 42bp at typing (early morning bullet erroneously pulled level from 5s10s curve).
• The presence of GBP2.25bn of 1.50% Jul-53 green gilt supply factored into underperformance in the long end pre-auction. Only average demand was seen at the auction, which has done little for the long end post-supply.
• SONIA futures are +0.5 to +3.5, with the reds outperforming.
• BoE-dated OIS softens on the day but is off dovish session extremes. Terminal policy rate pricing indicates ~20.5bp of further tightening in the cycle, leaning more towards the idea of one further hike than no further movement in the policy rate.