Cheaper Again

Two-way flow around the futures open in lieu of the firmer than expected headline retail sales data for April, which was at least partially countered by negative revisions to March, gives way to weakness as Gilt futures push lower, moving through yesterday’s base. Bears now look to a Fibonacci projection (93.92) as the next level of technical support.

• Cash Gilts are 3.5-4.5bp cheaper, with a flattening bias remaining apparent and yesterday’s yield highs breached across the curve.
• BoE-dated OIS show terminal policy rate pricing just above 5.60% at typing, roughly in line with yesterday’s peak. Thursday comments from MPC member Haskel indicated his preference to lean against the risk of inflation, which means that further rate hikes cannot be ruled out (although he played down the idea that high levels of inflation are becoming embedded in the UK).
• Local news flow has been dominated by a shift higher in Nationwide’s (the country’s largest building society) mortgage rates in lieu of the recent market moves.
• Elsewhere, late Thursday saw AJ Bell note that “UK retail investors piling into Gilts,” we will provide a little more colour on those comments in due course.