Cheaper, Although Round Numbers And Recent Extremes In Yields Limit Moves

Feedthrough from the news flow surrounding the confirmation of the Blinken-Xi meeting, coupled with continued trepidation ahead of this week’s BoE meeting and headlines noting that the average interest rate on a 2-Year fixed rate UK mortgage have topped 6% for the first time in ’23, dominate in early trade. That leaves Gilt futures -40 or so, ~10 ticks off worst levels, while cash Gilts are 1.5-4.0bp cheaper as the curve bear flattens.

• The weakness in Gilts ran out of steam as 2-Year yields stopped just shy of testing 5.00%, while 10-Year yields failed to top last week’s high.
• The 2-/10-Year curve operates just off last weeks inverted extremes, while the 5-/30-Year spread has moved beyond its own equivalent, although the latter still sits ~60bp away from its mini-Budget extremes.
• BoE-dated OIS has failed to establish itself above 5.90% in policy rate terms, despite a look above, while SONIA futures are as much as 7bp cheaper through the greens.