Firmer As Wider Core FI Rallies

Gilts have also benefitted from the broader rally in core global FI markets and cross-asset moves, leaving futures +35 or so, while the major cash benchmarks are 4-5bp richer.

• Note that Gilt futures remain comfortably within yesterday’s range.
• Lower than expected UK public sector borrowing figures for the month of July may have provided some support after what proved to be a relatively two-way open on the flow front.
• SONIA futures are flat to +5.5 through the blues, with the reds outperforming.
• BoE-dated OIS pricing has also flattened, running 1-6bp lower on the day. That leaves ~31.5bp of tightening showing for next month, while terminal policy rate pricing is a little below 6.10%.
• The Nov-33 I/L auction saw the average price print below pre-auction mids, while the coverage was in line with what was seen at the previous offering of the line back in June (which represented the launch). Ultimately, value on fly structures, coupled with the allure of the line moving to benchmark status at some point in the relatively near future and prevailing real yield levels seemingly provided enough demand so that the line didn’t struggle in initial post-auction trading, even with the aforementioned price dynamics observed.