June 19, 2024 09:23 GMT
Firmer-Than-Expected Services CPI Weighs, Gilts Widen Vs. Peers
GILTS
The firmer-than-expected UK services CPI reading weighs on gilts through the first half of the London morning.
- Gilts widen vs. core global peers as a result.
- Futures last -21 at 98.50 vs. lows of 98.47.
- Fresh downside pressure would target initial support at the Jun 4 high (97.86), which protects firmer support at the 20-day EMA (97.57).
- Zooming out, bulls remain in technical control, looking to force a break of Friday’s high (99.05).
- Cash gilt yields are 3-5bp higher, bear flattening.
- 2s10s edges away from recent ’24 highs and 5s30s remains rangebound.
- SONIA futures are -0.5 to -3.0, off early lows.
- BoE-dated OIS shows ~41.5bp of cuts through ’24 vs. ~45bp late yesterday.
- The first 25bp cut is more than fully discounted through the Nov MPC, with ~70% odds of such a move priced through the Sep MPC.
- Attention now moves to tomorrow’s BoE decision.
- We believe that today’s data makes a steady 7-2 vote increasingly likely, with further clarity on the policy trajectory only likely to come post-election.
- Our full preview of the event can be found here.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Jun-24 | 5.210 | +1.0 |
Aug-24 | 5.124 | -7.6 |
Sep-24 | 5.028 | -17.2 |
Nov-24 | 4.890 | -31.0 |
Dec-24 | 4.785 | -41.5 |
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