Futures Close Friday’s Opening Gap Higher Before Bouncing

Modest weakness in core global FI markets (owing to the bid in oil, hopes re: the Israeli-Hamas hostage situation and a bid in the Hang Seng) and the expectations of some fiscal loosening for UK households, despite some push back from the UK Chancellor, apply light pressure to gilt futures this morning.

• The contract closes the opening gap higher seen on Friday during the move, before bouncing to print -20 or so at 97.00, ~15 ticks off lows.
• The first level of meaningful technical support in the contract isn’t seen until the November 15 low (95.93), although the short -term bullish tone remains in play, with bulls eying resistance in the form of last week’s high (97.99).
• Cash gilt yields are 1.5-2.5bp higher across the curve, with a very modest flattening bias seen this morning.
• SONIA futures last show +1 to -3, with the whites outperforming and the reds/greens seeing the most weakness.
• BoE-dated OIS is little changed to 1.5bp firmer on the day.
• A BoE bulletin on financial stability matters and subsequent comments from BoE Governor Bailey present the focal points of the domestic docket today.
• Also note that we will get medium-term gilt sales from the BoE as part of its scheduled APF operations.
• A quick reminder that the DMO will not be coming to market with gilts this week, given the publication of the Autumn Statement on Wednesday. The fiscal update is expected to produce a reduction in the gilt issuance remit for the current FY given favourable fiscal developments (expect a lot more detail on that matter in our full preview of the event).