Firmer On Data, Slightly Less Worrying Auction Demand Metrics

Gilts remain underpinned, with demand at the latest (smaller-than-previous) 30-year gilt auction fairing a little better than the recent trend witnessed at DMO supply (albeit still not showing particularly strong results).

• This gave fresh impetus after the rally surrounding the softer-than-expected round of domestic economic activity and GDP data ran out of steam.
• Futures have traded back towards, but not matched, early London highs.
• The contract last trades +70, just above of 99.40, 5 ticks shy of best levels, operating within a 55-tick range. Today’s best levels present the initial point of technical interest for bulls.
• Cash gilt yields are 6.5-8.5bp lower on the day. 10-Year gilt yields look below 3.90% on the latest move, registering a fresh multi-month low in the process. Old double top resistance at the round number of 3.80% is now eyed.
• SONIA futures last show -0.25 to +10.5.
• BoE-dated OIS has registered fresh dovish extremes re: end of ’24 rate levels, showing ~97bp of cuts over that window as of typing, while markets continue to eye the June ’24 MPC as the most likely staging post for the first 25bp cut at present (albeit with ~15bp of cuts currently priced through the June ’24 MPC).
• Tomorrow’s BoE decision presents the next meaningful domestic risk event. See our full preview of the event here.