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Futures hit lowest level since 4 July; curve steepens further

GILTS
  • 10-year gilts are marginally underperforming Bunds this morning (although moves are broadly in line) while gilt futures have moved below yesterday's lows, hitting a low of 97.46 so far this morning, the lowest level since 4 July (but now back to 97.60; broadly in line with Monday's low). The drivers are not domestic.
  • 2-year yields have seen a smaller move today as the bear curve steepens - with 2s10s just shy of 20bp at writing and having exceeded yesterday's intraday high marginally. Note that as recently as 2 weeks ago the curve was trading around zero and even into negative territory, with around half of the move seen since Wednesday's close. In spite of this, the steepening seen this week is shallower than seen across the German curve.
  • As we noted in the SONIA bullet, domestically the main focus is looking ahead to Chancellor Reeves' fiscal announcements on Monday and the MPC meeting next Thursday where markets are pricing in a 44% probability of a 25bp cut (we have said for some time that we think the decision is close to 50/50).
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