Dovish BoE Repricing Dominates During Pre-U.S. CPI Trade

Gilts remain the outperformer across the core global FI sphere, supported by the softer than expected AWE data within the latest domestic labour market report. Yields there are 8.5-12.5bp lower on the day, with the curve bull steepening. Recent front-end outperformance comes alongside fresh receiver-side flows in BoE-dated OIS.

• Those flows triggered a brief and modest move through November extremes re: total BoE cuts in ’24, before that measure stabilised around 85bp. Fresh session highs for gilt futures were also seen, before a tick away from best levels.
• A reminder that today’s data isn’t seen as a gamechanger for Thursday’s BoE meeting, but continued signs of a loosening labour market promote dovish flows further out the OIS strip.
• Recent lows in 10-Year gilt yields remain intact.
• BoE pricing has dominated, with markets shaking off another round of questionable demand at the latest 5-year gilt auction.
• Tsy yields are 2-5bp lower across the curve, with bull flattening seen. CPI and 30-Year Tsy supply provide Tuesday risk ahead of tomorrow’s FOMC decision.
• Bunds are a little shy of session bests, with yields running 3.5-7.5bp softer across the German curve and bull flattening seen.
• A quick reminder that a bid in JGBs helped provide some support in Asia-Pac hours.