Cheaper And Steeper To Start

Impetus from wider core global FI markets has helped Gilts lower to start the week.

• Futures last show -45, a little off worst levels of the day but comfortably above Thursday’s low.
• Cash gilts sit 2.5-5.5bp cheaper across the curve, steepening alongside core global peers.
• As noted earlier, weekend domestic headline flow was dominated by political posturing and disagreements re: Crossrail, while the FT ran a piece flagging notable gilt short cover on the part of hedge funds.
• We haven’t had much in the way of UK-specific drivers to go off since markets opened.
• SONIA futures run flat to -5.0 through the blues, with a light steepening bias seen. Generally looking to gilts for direction.
• BoE-dated OIS sees some light twist steepening of the strip. ~9.5bp of tightening is showing for Nov, while ~16.5bp of tightening (2/3 odds of a hike) is priced through February’s MPC, as participants continue to reassess the monetary policy outlook in the wake of last week’s decision.
• There isn’t much of note on the UK domestic docket today, with lower tier data and long-dated active QT sales from the BoE the only points of note on the slate.