Futures Look Through Yesterday’s Low, Retail Sales Cap & Reverse Opening Gap Higher

The open initially saw gilt futures latch on to the tick away from Thursday cheaps in both Bund & U.S. Tsy futures. The move has since reversed, leaving the gilt contract -25 or so at typing, as the opening gap higher is closed, with the contract looking through yesterday’s lows. Cash Gilts run 1-2bp cheaper across the curve.

• Better than expected UK retail sales data will have helped cap/reverse the bid.
• June’s public finance data was a little more favourable than expected.
• UK political matters failed to meaningfully impact the space, with a victory for each of the Conservative, Labour & Liberal Democrat parties noted in the by-elections that were conducted yesterday. The ruling Conservatives avoided the worst-case scenario, but the results underscore the headwinds that PM Sunak faces ahead of the next general election (which BBG sources have suggested could take place in November ’24).
• SONIA futures run +1.0 to -3.0 through the blues, with some light twist flattening in play.
• BoE-Dated terminal rate pricing on the OIS strip is essentially unchanged on the day, with terminal policy rate pricing hovering a little above 5.95%.