Curve Flattens, Broader Bid Outweighs Bailey

The bid we have covered re: wider core global FI feeds into gilt futures at the open.

• That allowed the contract to gap higher, showing as high as 97.51 in the process, before backing off to trade around 97.45 last, +40 or so on the day (lows of 97.26 were seen on the pullback).
• Bulls remain in short-term technical control, with last week’s high in the contract (97.99) providing the initial point of upside interest.
• Cash gilt yields are flat to 4bp lower across the curve, bull flattening.
• A quick reminder that post-gilt close comments saw BoE Governor Bailey flag upside risks to inflation re: food prices and energy. He also touched on the still tight labour market producing elevated wage outcomes and services inflation that is much too high. He underscored the idea that it is much too early to think about rate cuts, while highlighting vigilance when it came to looking for signs re: persistent inflation, stressing that any risks to the inflation outlook may trigger further tightening.
• SONIA futures are generally a little above pre-gilt opening levels, -1.0 to +4.0 through the blues, twist flattening, as Bailey’s comments and the rally for most of the gilt curve are accounted for.
• BoE-dated OIS trades either side of unchanged, little moved on the day.
• Bailey will head up a group of MPC members testifying in front of the Treasury Select Committee later this morning.
• That provides the focal point of today’s domestic docket, while fiscal speculation is set to continue ahead of tomorrow’s Autumn Statement.
• Public finance data saw higher than exp. borrowing in October, with the ONS noting that Apr-Oct borrowing was GBP16.9bn below OBR forecasts.