Firmer & Flatter

Gilt futures have firmed in early Monday trade. The rally in Bund & Tsy equivalents since Friday’s gilt close provided initial support.

• A pullback from best levels was then seen, before fresh session highs were made.
• The contract last shows +30 or so around 99.10, ~5 ticks shy of the peak of its early 33-tick range.
• Friday’s high (99.24) is located a little way above, while more meaningful resistance can be found at the Jan 16 low/gap target (99.71).
• Cash gilt yields are 1-5bp lower as the curve flattens. 10s stabilises around the 3.90% mark after gilt bears failed to force a break of 4.00% last week.
• 2s10s and 5s30s flatten away from respective early ’24 peaks.
• SONIA futures show -2.0 to +2.5 through the blues, little changed from levels seen shortly after the gilt open. The uptick in gilts provided some support seeing the space off early Monday lows.
• BoE-dated OIS shows ~107.5bp of cuts through ’24 vs ~104.5bp seen ahead of the gilt open.
• Local headline flow has been very limited since the open.
• Note there will be nothing in the way of APF sales from the BoE today.
• A reminder that the DMO is set to issue a new 30-year 4.375% Jul-54 gilt via syndication at some point this week, we believe that will likely come on Tuesday. The gap in APF sales can probably be explained by the presence of this syndication.