Futures Breach Next Resistance

Gilts extend yesterday’s rally in the wake of the FOMC decision.

• Futures breach resistance at 99.62, turning focus to 100.00, a level that has not been registered since late March (based on continuation charts).
• Contract last +33 at 99.55, vs. initial highs of 99.79.
• Yields are 1-2bp lower, with the belly outperforming.
• 10s extend their move below 4.00%, with gilt bulls now eying the Mar 22 yield low (3.904%).
• BoE-dated OIS shows ~14.5bp of cuts for today’s decision, while most SONIA futures hold the bulk of their early rally.
• We have characterised today's rate decision as 50/50 for some time due to a number of factors – a lack of communication from the MPC (due to the election and the pre-meeting blackout periods), a changing composition of the MPC (with Lombardelli replacing Broadbent) and some inconclusive data.
• Note that BoE Governor Bailey's press conference will represent his first round of public comments since the time the election was called.
• BoE chief economist Pill will then conduct a virtual Q&A session covering the decision (17:00 London).
• Our full preview of the BoE decision can be found here.