Futures Back Below Unchanged After CPI Rally, Curve Steeper With DMO Syndication Eyed

Gilt futures fade further from best levels, after initial technical resistance levels were not breached across the core FI sphere, despite a softer than expected round of UK CPI data.

• The initial domestic UK CPI-induced richening/dovish repricing has been reversed across most of the UK FI space.
• That leaves the contract -12 at 96.63, 5 ticks off pullback lows and ~50 ticks shy of highs.
• Cash gilt yields are little changed to 3.5bp higher on the day, steepening, with 2s10s and 5s30s off their respective multi-week flats.
• SONIA futures are 1.5bp firmer to 3.0bp softer through the blues, with a light twist steepening bias now seen on the strip.
• BoE-dated OIS is back to little changed on the day. The strip prices a circa 80% chance of a 25bp cut through the end of the June ’24 MPC, after such an outcome was fully priced post-CPI. A full 25bp cut is more than fully discounted come the end of the August ’24 gathering. ~73bp of cuts are priced through ’24 on the whole.
• Comments from BoE’s Haskel headline the remainder of the domestic data docket today (due at 18:00 London, although the topic of investing in Britain may limit the scope for pertinent comments), while the syndication of the new 20-year 4.75% Oct-43 line is ongoing.
• The presence of that supply will be helping the steepening /keeping outright rallies in check.