Domestic & Macro Matters Weigh

The combination of wider macro inputs flagged elsewhere (Fed Chair Powell’s weekend interview and a hawkish BoJ sources piece from the FT) and domestic matters (the previously covered expectations of firms re: price rises stemming from energy costs & an ONS update pointing to a slightly tighter than previously envisaged labour market) apply pressure to gilt futures early today.

• That pushes the contract as low as 98.23 before a modest uptick to the 98.30 zone. The contract is through last week’s low.
• Support comes in at the Jan 16 low (98.16), which protects the bear trigger (97.57).
• Cash gilt yields are 4.5-6.5bp higher, with a light bear flattening of the curve.
• SONIA futures are flat to 9.0bp lower on the day, with the late whites and reds under the most pressure.
• BoE-dated OIS continues to pull cuts out of ’24 pricing, now showing ~84bp of easing over that horizon.
• Final services and composite PMIs provide the domestic data highlights during the remainder of the session, while another round of comments from BoE chief economist Pill are due to cross.
• Elsewhere, medium-term bucket gilt sales from the BoE’s APF will be seen later today.