Comfortably Firmer On The Day, Local Inflation Exp. Data Supports Alongside Wider Bid

Gilts continue to look to wider core global FI markets for direction, with dovish ECB speak and heightened geopolitical tensions helping futures move higher and yields lower.

• Gilt futures sit 53 ticks higher on the day at 98.87, with bulls running out of steam just ahead of 99.00 (session high of 98.99).
• A break of 99.00 would expose the 20-day EMA (99.43). A clear break of that level is needed to ease the bearish pressure.
• Cash gilt yields are 2.5-4.5bp lower, with 10s leading the rally.
• Local inputs saw a continued moderation in the Citi/YouGov 1-Year ahead inflation expectation metric, which would have provided some background support.
• Note that the 1-Year ahead measure in that survey moved to fresh cycle lows, but the longer run measure sits 0.2ppt above its own ’23 base.
• On the other hand, continued speculation re: UK fiscal loosening (the potential for further National Insurance cuts got airtime in the local press via weekend source reports) will have provided some (modest) counter, which capped the bid at the open, before a second round of demand came in.
• SONIA futures are -0.5 to +6.5 through the blues, with a light twist flattening bias.
• BoE-dated OIS stabilises showing 107-108bp of cuts through ’24, with ’24 contracts running little changed to 3.5bp softer on the day.
• The BoE will conduct APF sales from its short maturity bucket later today.