EUR CPI Weighs, Recent Ranges Intact

Spill over pressure from EGBs has been seen in gilts, with firmer-than-expected national European and then Eurozone-wide CPI data dominating headline flow.

• Futures have extended their pullback from yesterday’s failure at 96.00 as a result, last printing -9 at 95.70, a little above session lows of 95.62.
• Bears remain in technical control, with initial support seen at Wednesday’s low (95.33). Bulls need to overcome Wednesday’s high (96.43) to start turning the technical backdrop a little more in their favour.
• Cash gilt yields are 1.5-3.0bp higher, with 10s under the most pressure and the recent curve steepening theme intact.
• A reminder that the release of the DMO’s quarterly issuance calendar had little tangible market impact, as it failed to provide any meaningful surprises.
• SONIA futures are at/just off worst levels, although stick to narrow ranges, last flat to -1.5.
• The scope of the recent hawkish adjustment in both EUR & BoE-dated STIRs is probably limiting reaction here, with ~30bp of ’24 BoE cuts still priced into dated OIS markets.
• Cross-market spill over will be eyed for the remainder of Friday, with continued adjustments to the Eurozone inflation data and this afternoon’s U.S. PCE prints set to dominate.
• Gilt month-end extensions are not seen as meaningful but may provide some modest background support later in the day.