GILTS: Futures Pierce Initial Support, 10s Hit Fresh Dec High, Weakness Limited

Gilts continue to take cues from wider core global FI markets, with news flow remaining subdued.

• Futures last -26 at 95.50, off lows at 95.45.
• Initial support at the Dec 4 low (95.49) pierced earlier.
• Fresh downside would expose the November 28 low (95.17), although the short-term bullish corrective phase in the contract remains intact. Initial resistance located at 96.18.
• Yields 1-3bp higher on the day, 10- to 40-Year zone leads the sell off.
• Monday’s foray below 4.25% in 10s failed to challenge last week’s low (4.190%), with 10s then printing month-to-date highs (4.306%) this morning.
• Spread to Bunds now 2.5bp wider on the day, last 217bp, sticking to the recent range.
• 220bp caps, while stickier UK inflation and fiscal/issuance risks in the UK limit pullbacks.
• GBP1.5bln 0.75% Nov-33 linker supply was smoothly digested.
• SONIA futures tracking long end, last flat to -2.5.
• BoE-dated OIS prices 82bp of cuts through ’25 vs. 84bp at yesterday’s close/early today.
• That remains off the multi-week dovish extreme of ~88bp but is notably more dovish than the ~55bp briefly printed in the days that followed the BoE’s November decision.
• No tier 1 risk events of note today, which will leave focus on cross-market spill over.
• Tomorrow’s U.S. CPI data presents the next key macro risk event.