Futures Pierce Resistance Before Fading, Fresh Multi-Week Yield Lows Seen

Gilt futures pierce initial resistance at 98.23, before stalling ahead of 98.30 and fading back to the 98.15 area.

• A fresh extension higher would put the bearish technical backdrop at greater risk, with the next resistance area seen at the 61.8% retracement of the Mar 12 - Apr 25 bear leg (98.46).
• Cash gilt yields are 2.5-4.0bp lower, with the curve flattening.
• Fresh multi-week lows are seen in all benchmark gilt yields.
• Although the initial rally was aided by some catch up to post-gilt close price action in Tsys and Bunds, gilts now outperform their German peers across the curve, with the most meaningful spread tightening coming in the front end.
• That suggests that yesterday’s MPC outcome and the potential for a swifter round of cuts than the market currently prices is filtering into cross-market plays.
• Monetary policy matters are outweighing the firmer-than-expected monthly UK GDP data seen earlier today (we played down the importance of that particular release ahead of the gilt open).
• SONIA futures also firm, last showing little changed to +4.0.
• BoE-dated OIS shows ~60bp of cuts through year end, with 13bp of easing showing through the June MPC (~52% odds of a cut at the next MPC meeting).
• BoE chief economist Pill will speak again today (12:15 London), with comments from dovish MPC dissenter Dhingra also due (12:45 London).