Early Rally Holds, BoE Speak Eyed

The opening rally in gilts holds, with a spillover from a dovish RBNZ and solid demand at yesterday’s 3-Year U.S. Tsy auction underpinning.

• Futures +47 at 98.15. Initial resistance at the July 8 high (98.27) is still intact. A break above there would threaten the bearish short-term outlook. Gilt yields are 1-4bp lower, 10s outperform.
• SONIA futures flat to +5.5, BoE-dated OIS showing 15bp of cuts for August and 48bp through year end.
• Appearances from BoE’s Pill & Mann dominate the UK calendar today.
• We have noted that, Pill is generally seen as the most hawkish internal MPC member. If he strikes a more dovish tone it would likely be interpreted as a dovish shift for all of the internal members and increase the probability of an August cut. In our view this is the most important UK event of the week.