Futures Mid-Range, Wider Core FI Rally Supports, Bailey Stresses Higher For Longer Again

Gilt futures sit mid-range, last +25 around 97.10.

• Cash gilt yields are 3-7bp lower on the day, with 5s leading.
• Wider core global FI swings have been the dominant factor for gilts since the open, with the late NY/Asia-Pac extension higher adding support, before the wider rally stalled.
• Familiar comments from BoE Governor Bailey re: the need for higher for longer rates added a domestic cap for the rally.
• Elsewhere, we saw another weak round of demand at the latest 2-year 3.50% Oct-25 gilt auction (see more on that here). This helped 2-year gilt yields away from session lows.
• SONIA futures last show flat to 8.5bp firmer, with the reds/greens leading the bid as the space looks to wider core global FI, as opposed to BoE speak, for direction.
• BoE-dated OIS shows flat to 5.5bp softer through ’24 MPC meetings.
• Terminal policy rate pricing now sits 5bp above prevailing SONIA levels. Beyond there, a 25bp cut is more than fully discounted through the August ’24 MPC, with ~71bp of cuts showing through ’24 on the whole. The space doesn’t challenge recent dovish extremes.
• Further comments from Bailey and outgoing BoE markets team head Hauser (unlikely to be market pertinent given the setting of the address) are due later today.