Futures Gap Higher Then Ease From Highs, BoE Setup & Cross-Market Moves In Focus

Gilt futures draw some support from the move in wider equity markets since yesterday’s close, coupled with the move in Tsys in light of Fitch’s one-notch downgrade of the U.S., allowing the contract to gap higher at the open, moving away from Tuesday’s late lows. The contract has since faded from opening highs to last trade around flat.

• The front end of the Gilt curve outperforms, akin to U.S. Tsys, with the major benchmarks running little changed to 2.5 richer.
• SONIA futures are 0.5-4.5bp richer, with the front end of the reds leading, while BoE-dated OIS is showing around 34bp of tightening for tomorrow’s meeting, running touch softer on the day.
• There is nothing in the way of meaningful domestic releases scheduled today, which will leave focus on cross-market impulses and set up ahead of tomorrow’s BoE decision (click for our full preview of that event).
• Note that the Times’ shadow MPC has suggested that “the Bank of England should carry out an interest rate rise of a quarter of a percentage point tomorrow to keep control of stubbornly high inflation.”