Futures Away From Lows, Curve Twist Steepens

Gilt futures initially benefit from the softer than expected domestic retail sales and uptick from cheaps in wider core global FI markets, while comments from BoE Governor Bailey re: no real surprises in the latest CPI data probably provided incremental support.

• Still, the contract is off its early session high.
• Gilt futures last show +10 or so around 91.65, ~45 ticks away from yesterday’s low.
• Cash gilts twist steepen, with the curve also looking to comments from Fed Chair Powell late Thursday (patience re: policy rates vs. term premium discussion in the long end). Benchmark yields are 4bp lower to 2.5bp higher, pivoting between 10s and 30s.
• 2s10s move to the least inverted level seen since June, while 5s30s are still shy of recent multi-month steeps.
• SONIA futures are 1.0-6.5bp richer, with the reds & greens outperforming.
• BoE-dated OIS holds the bulk of the early dovish adjustment to last run 1.5-4.5bp softer on the day.
• While there is no local data of note set to be released ahead of the weekend, Moody’s (current rating: Aa3; Outlook Negative) & S&P (current rating: AA; Outlook Stable) are slated to assess the UK’s sovereign credit rating.
• Also be aware of the potential for pre-weekend hedging surrounding the Israeli-Hamas conflict.