Firmer & Flatter

Gilt futures followed the core global FI move away from Monday’s session lows at the open, before a brief and shallow look below yesterday’s trough. The move lower then gave way to a second-round bid, leaving the contract +50, a little shy of best levels.

• Cash Gilts are 2.5-5.0bp richer, bull flattening, after yesterday’s hawkish BoE repricing (terminal policy rate pricing now hovers just below 5.95% after threatening 6.00%) and the break above 5.00% in 2-Year yields facilitated bear flattening.
• The 4.50% yield mark in 10s held around the open, with the impact of that level holding helping to facilitate the morning rally.
• Local news flow has been limited, outside of some light relief for shoppers when it comes to the rate of grocery price inflation.
• Participants remain focused on tomorrow’s inflation report, ahead of the latest BoE monetary policy decision (Thursday). All of those surveyed by BBG look for a 25bp hike re: the latter. Market pricing is a little more aggressive, showing ~31bp of tightening for the event.
• SONIA futures are 0.5bp cheaper to 6.0bp richer through the reds, twist flattening.
• Results from the DMO’s auction of GBP3.75bn of the new 4.50% Jun-28 Gilt will cross imminently.