Firmer, 2s10s Above 30bp

Gilts rally alongside global peers following yesterday’s late weakness in U.S. equities.

• Dovish repricing in NZ markets following inflation expectations data also noted.
• Futures move back to late Monday levels, last +27 at 99.76, off opening highs of 99.84.
• Initial resistance remains some distance away at the August 6 high (100.43), although the recent pullback is deemed corrective, with initial support at the Jun 21 (99.23) high intact.
• Front end leads the rally, yields 1.5-3.5bp lower.
• Recent steepening theme maintained, 2s10s above 30bp for the first time since Q422, while 5s30s is ~7bp off YtD highs.
• SONIA futures last 0.25 to 5.5bp higher, pulling back from highs alongside gilts.
• The latest round of labour market surveys provided mixed results, underscoring the difficulties that the BoE faces when it comes to timing further rate cuts (further details available in our pre-gilt open STIR bullet).
• The local calendar is limited until next week’s labour market & CPI data, leaving focus on wider market sentiment.