Front End Leads Sell Off

Spill over from late Tuesday price action in U.S. Tsys drags gilts lower at the open.

• Futures trade as low as 95.46, with initial support at the 25 April low (95.36) nearing.
• A breach there would expose round number support (95.00).
• Cash gilt yields are 2.5-3.5bp higher across the curve, bear flattening.
• 2s move to the highest level seen since the late Feb benchmark roll.
• 5+-Year benchmarks are all a touch below their respective April highs.
• SONIA futures see a modest extension of the pre-gilt open weakness, last little changed to 3.5bp lower.
• BoE-dated OIS shows ~36bp of ’24 cuts, with odds of a 25bp cut come the end of the Sep MPC narrowing towards 85%.
• Looking ahead, final UK manufacturing PMI data is due today. But greater focus will be placed on cross-market setup ahead of the U.S. FOMC decision and U.S. data.