Front End Leads Rally After Labour Market Data

Gilts firm on the back of the labour market data.

• Futures stick within the range seen in recent session, +27 at 99.88 (early range 99.79-90).
• Cash gilt yields are 2.0-5.5bp lower, curve bull steepens.
• 5s30s continue to steepen away from last week’s multi-month low.
• SONIA futures extend higher after the gilt open, last flat to +6.5.
• BoE-dated OIS prices ~75bp of ’24 cuts vs. ~72bp post-data and ~69bp at yesterday’s close.
• That move helps the front end of the gilt curve outperform.
• We don’t see this morning’s wage print as a gamechanger and still favour August as the most likely start point re: the BoE’s cutting cycle (fully priced by markets).
• This morning will see the DMO come to market with GBP3.75bln of the 4.625% Jan-34 gilt.
• Comments from BoE hawk Mann are due later today, but she already reiterated her well-known stance yesterday.
• Elsewhere, comments from BoE Governor Bailey are due, but the setting limits the potential for market moving comments.