Flattish Start, More Supply Due

Core global FI markets sit a little above yesterday’s closing levels, with gilt futures initially showing higher before fading to trade around flat at ~100.40 (early range of 100.36-100.56).

• There hasn’t been much in the way of meaningful headline flow to note.
• Still, the continued presence of meaningful IG supply is probably limiting wider FI rallies.
• Most of the domestic focus remains centred on the political arena and the latest round of mortgage rate cuts from tier 1 names, flagged yesterday.
• Cash gilt yields are essentially unchanged.
• The local data docket is empty today.
• BoE Governor Bailey will appear in front of parliament, with a focus on the recently released Financial Stability Report.
• The domestic highlight will likely come in the form of the latest gilt auction. The DMO will return to the market on Wednesday to launch its new long 3-year 3.75% Mar-27 gilt with GBP4.0bln on offer. This issue will replace the 3.50% Oct-25 gilt as the shortest on-the-run gilt and complement the 4.50% Jun-28 gilt in the short-dated sector of the curve. Bid-to-covers for short-dated gilts have been between 2.36-2.61x over the last quarter with tails being relatively wide (between 0.9-2.0bp).