Cross-Market Impulses Outweigh Local Data

Cross-market impulses, derived from softer-than-expected European PMI data, have helped underpin gilts, even with domestic PMI data printing firmer-than-expected at the composite level (headline services PMI was firmer-than-expected, while the headline manufacturing PMI was softer-than-consensus).

• Gilt futures last show +35 or so, ~10 ticks off the top of the early 65-tick range.
• Yesterday’s boundaries in the contract remain intact.
• Cash gilt yields are 0.5-5.5bp softer across the curve, with a flattening bias seen all day.
• SONIA futures run -1.0 to +2.0, with a lack of conviction noted thus far.
• BoE-dated OIS seems happy to print ~110bp of cuts for ’24, at least for now, after a foray beyond ~125bp of easing in post-FOMC reaction early on Thursday. Further forward, the strip now prices near 90% odds of a first 25bp cut come the end of the May ’24 MPC. Such a move was fully priced yesterday.
• Local headline flow has been limited outside of the PMIs, with nothing in the way of meaningful comments provided by BoE Deputy Governor Ramsden.
• Lower tier consumer confidence data was not a needle mover, as is usually the case.
• The BoE will announce the APF sales schedule for Q124 at 16:30 today.