Firmer To Start

Softer-than-expected French production data, complete with negative revisions, helped the early London rally in core global FI markets extend, before Spanish services PMI capped the rally.

• Gilt futures +45 at 98.48 (98.35-61 range).
• Key short-term resistance (Feb 26 high, 98.53) has been breached. That weakens the bearish technical picture a little.
• The next upside levels come in at the 1.236 retracement of the Feb 26-29 bear leg (98.89), followed by 99.00.
• Cash gilt yields are 2-4bp lower, bull flattening.
• SONIA futures are flat to +5.5 through the blues, strip bull flattens.
• BoE-dated OIS once again shows ~60bp of ’24 cuts
• The latest round of UK fiscal speculation has focused on the potential for a 2% cut to the basic rate of income tax, with familiar financing ideas flagged once again.
• This isn’t a new idea but would represent slightly looser fiscal settings than were envisaged just one week ago.
• That would point to the need for higher for longer BoE interest rates.
• Elsewhere. BRC like-for-like sales data was softer than expected.
• Barclaycard spending data was also soft.
• Both survey providers pointed to the weather as a headwind re: shop footfall, along with well-known headwinds for consumers.
• Final services and composite PMI data headlines the UK schedule today, while gilts will have to digest GBP3.75bln of 3.75% Mar-27 supply.