Curve Twist Flattens

Gilt futures initially show higher before trading back in line with late Monday levels, last +20, eyeing wider core FI moves.

• Cash gilts twist flatten, with the major benchmarks 4bp cheaper to 1bp richer, pivoting around the 7- to 10-Year zone.
• Late Monday comments from BoE’s Mann pointed to “sticky downwards” wage and price inflation. She also warned that the length of time that inflation remains above target can have an impact through a drift higher in expectations, which would suggest that policy has to be more aggressive, if such a dynamic becomes apparent. These comments aren’t a real surprise given her generally hawkish stance since joining the MPC and imply she will continue to vote for rate hikes for some time.
• Growth in BRC shop sales slowed in September, although the UK Head of Retail at BRC stated “with the warm weather delaying household heating, news on falling inflation and a hold on rising interest rates, consumers will hopefully be feeling more confident as thoughts turn to Christmas shopping.”
• Also note that data from Barclays saw an uptick in card spending in September, although that was largely down to increased spending on motor fuel.
• BoE FPC meeting minutes present the highlight of a limited domestic docket on Tuesday. The market will also have to digest GBP900mn of 0.125% Mar-39 I/L supply.