Fresh Bid On Soft Domestic PMI Data

Gilt futures extend the rally that stemmed from the Eurozone PMI releases as the domestic round of flash PMIs also print at softer than expected levels.

• The details of the report note that “the UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries. “July's flash PMI survey data revealed a deepening manufacturing downturn accompanied by a further cooling of the recent resurgence of growth in the service sector… The survey data signal further, potentially marked, falls in consumer price inflation in the months ahead… Manufacturing input costs are falling and supplier performance is improving at the fastest rate we have ever seen.”
• Gilt futures run +75 or so at typing, just shy of post-data bests, while cash Gilts are 5-9bp richer, with 5s leading the rally and the longer end of the curve lagging.
• Technical resistance in futures is seen at the 19 July high/bull trigger (97.84).
• SONIA futures sit as much as 12bp richer through the back end of the reds/front end of the greens, as that area of the strip outperforms.
• BoE-dated OIS comes in further, running 4-11bp softer on the day, with ~35bp of tightening showing for next month’s gathering and terminal policy rate pricing in to ~5.85%.