Futures Pressured But Key Support Untested, Curve Twist Steepens

Long end UK rates and STIRs generally followed the broader ebb and flow of wider core FI markets during holiday-shortened Friday trade.

• There was little in the way of meaningful fundamental macro inputs to flag, outside of some continued weakness in the long end of the JGB curve after Wednesday’s announcement re: BoJ Q1 Rinban intentions.
• That left many to point to momentum and profit taking behaviour as gilt futures ticked away from recent highs.
• Bears failed to test support at 102.05 in futures, with lows of 102.26 seen before a recovery to 102.65 into the close, as the contract shed the best part of 75 ticks on the day.
• Lower tier local data (consumer & card spending surveys, along with Nationwide house price data) wasn’t upbeat, but wider cross-market moves/momentum was left at the fore.
• Cash gilt yields were 3.5bp lower to 3.5bp higher as the curve twist steepened.
• 10-Year yields retook 3.50% on a closing basis.
• SONIA futures closed flat to 5.5bp lower through the blues.
• BoE-dated OIS was little changed to 3.5bp firmer across ’24 contracts, leaving ~151bp of cuts priced through ’24.
• Final PMI readings, the BoE DMP survey and the initial round of gilt supply present the scheduled UK highlights of the holiday-shortened first week of '24.