Cheaper And Steeper, Bears Push Futures Through Initial Technical Support

Gilts continue to be biased cheaper on the lack of meaningful, fresh escalation in the Israel-Hamas conflict (some of last week’s geopolitical risk premium has been removed), although a land invasion of Gaza seems relatively imminent, given weekend warnings from the IDF and delays that were seemingly only due to weather conditions in the region.

• Still, the lack of escalation (for now) leaves futures -50 or so, with bears pushing the contract through Wednesday’s session lows. Bears now look to 93.04, the Oct 10 low, as the next area of technical support.
• Cash gilts run 4.5-7.5bp cheaper as the broader curve steepens a little.
• SONIA futures are flat to -4.0 through the blues, bear steepening.
• Meanwhile, liquid BoE-dated OIS contracts run 0.5-4.5bp firmer, with that strip also steepening.
• BoE speak hasn’t moved the needle, with little new in weekend comments from BoE Governor Bailey and outgoing Deputy Governor Cunliffe. More recently, chief economist Pill reiterated his own recent lines of commentary.
• A quick reminder that well-trodden issues for the UK housing market and consumer headwinds stemming from inflation continued to do the rounds in weekend press reports.