Firmer To Start, But Off Best Levels

The combination of dovish ECB sources, softer-than-expected Tokyo CPI data out of Japan and solid enough demand at the latest 7-Year U.S. Tsy auction allows gilts to firm at the open.

• Futures trade as high as 98.78 before easing back to 98.61 last, +23 on the day. There was a brief look through Wednesday’s best levels before the pullback, well-defined technical parameters remain in play after yesterday’s failure to take out key support.
• Cash gilts are 2-3bp firmer, with a light bull steepening bias seen on the curve early today.
• SONIA futures and BoE-dated OIS have ticked away from dovish session extremes.
• SONIA futures are flat to +4.0 through the blues, while BoE-dated OIS sits flat to 4bp softer on the day.
• Cooling inflation allowed the latest domestic GfK consumer confidence print to register the least negative reading in ~2 years, although the headline measure remains comfortably below 0.
• The local docket is limited into the weekend, with domestic focus already on next week’s BoE meeting. Participants will be watching broader headline and cross-market inputs today (ECB speak and U.S. PCE data provides the major scheduled risk events into the weekend).