Fresh Pressure

A sell off in gilts is seen at the open, with underperformance once again becoming apparent vs. core global peers.

• Fiscal worry remains evident amongst the local thinktanks, although that doesn’t really explain the move in our opinion.
• Also note that post-gilt close weakness in the likes of Tsys and Bunds had largely reversed into the gilt open, leaving a local feel to the move lower.
• Gilt futures print as low as 97.71, while cash gilt yields are last 2-3bp higher, as a light flattening bias is seen.
• Initial support at yesterday’s low (97.81) gives way on the move, leaving bears to focus on key support at the Dec 11 low (97.39) next.
• 10-Year yields push through yesterday’s high to print around 4.05%. The next marker on that front comes in the form of the Dec 11 high (4.085%).
• SONIA futures come under pressure alongside gilts, to last trade flat to 5.0bp lower through the blues. Contracts generally operate at/just off fresh session lows.
• BoE-dated OIS now shows flat to 4bp higher, with ~91bp of cuts priced through ’24 (a little over 60bp off the late Dec dovish extremes, which briefly showed over 150bp of cuts).

• Looking ahead, only lower tier local data is due today, which will likely leave focus on wider market matters and headline flow (the latest ECB decision and U.S. data provide the scheduled risk events of note).