Firmer But Off Best Levels

Gilts continue to meander through morning trade as participants assess the mixed labour market data outlined earlier. That leaves Gilt futures +25, while cash benchmarks run flat to 4bp richer as the curve bull steepens, with the space operating a little off best levels of the day.

• We are a little surprised that the firmer than expected wage data hasn’t been the driving force for UK fixed income markets, although plenty of tightening is already priced in, while some of the other headline labour market measures show signs of colling from very tight conditions. Terminal BoE policy rate pricing on the OIS strip has edged below 6.40% in recent trade.
• SONIA futures are -0.5 to +6.0 through the blues, with the front end of the whites underperforming and the back end of the reds/front end of the greens outperforming.
• Elsewhere, headline flow has indicated that the average UK 2-year fixed mortgage rate has surpassed its mini-Budget peak.