Firmer Alongside Global Cues, Domestic PMIs & Gilt Supply Eyed

The combination of the late NY Tsy rally, RRR cut from the PBoC and initial rounds of preliminary PMI prints from the European continent provide support for gilts early today.

• Futures gapped higher at the open, with the move extending in the time since, last +26 at 98.65, 11 ticks off the high of the early 33-tick range.
• Cash gilts see a parallel 3-4bp shift lower on the move.
• SONIA futures run 0.5-4.5bp firmer through the blues.
• BoE-dated OIS is flat to 5bp lower through ’24 contracts, showing ~104bp of cuts through ’24 after a foray below 100bp yesterday.
• Overnight XpertHR median basic pay award in the 3 months to the end of December 2023 remained at +6% Y/Y for the third consecutive month. XpertHR believe “pay awards have peaked from last year, with more than half of 2024 deals expected to be lower than those awarded in 2023.” Some January 2024 pay deals are coming through, and the Xpert HR senior content manager said “almost half of January 2024 pay deals are lower than the same employees received a year ago.”
• Elsewhere, OBR critique of the government’s fiscal ideas and related rigour was noted.
• Flash PMI data headlines the domestic data docket today.
• Elsewhere, the DMO will return to market via GBP4.0bln of the short 5-year 4.50% Jun-28 gilt