Front End Underpinned Post-CPI, Futures Chewing Higher After Breaking Key Resistance

The softer than expected (but still elevated) UK CPI data remains in the driving seat this morning. 2-Year yields are on track for their biggest 1-day decline since March, hitting the lowest level seen since mid-June, although the front end of the curve operates off dovish session extremes. Meanwhile, the longer end sits at/around richest levels of the day, as the major benchmarks run 13-28bp richer, with the curve bull steepening.

• Gilt futures are +175 on the day, showing at the highest level since 1 June. Round number resistance at 98.00 presents the next technical hurdle after this morning’s data-inspired breach of several key resistance levels.
• SONIA futures run 3.5-31.5bp richer through the reds, with the reds outperforming on the wider strip as the contracts operate a little off dovish session extremes.
• BoE-dated OIS runs flatter on the day, coming in post-CPI. That leaves ~50/50 chances of a 50bp hike priced for next month’s meeting, while terminal rate pricing shows at ~5.90%, threatening the first sub-6% close seen since 20 June.
• GBP3.75bn of Jun-28 Gilt supply is due later today, with the previously outlined address from BoE’s Ramsden re: QT also noted.