Futures Recover To Mid-Range After Early Two-Way Flow

The early pullback from best levels saw gilt futures stabilise around unchanged levels, before ticking back up to the 95.65 area, +25 on the day. The contract last shows ~25 ticks shy of the peak of its ~50 tick range. Note that the early move higher saw a brief closure of Friday’s opening gap lower.

• Cash gilts yields are 1-2bp richer on the day, with 5s leading the move at the margin.
• A quick reminder that BoE Governor Bailey reaffirmed a familiar train of thought in his latest interview with the local press, pushing back on the idea of rate cuts in the foreseeable future. Elsewhere, he noted that recent inflation figures were “very good news.” Although the latter point was essentially a repeat, it seemingly provided some support for the short end early on, which spilled into gilts.
• Still, Bailey’s insistence re: no rate cuts in the foreseeable future, the realisation that the “very good news” comments were essentially a repeat and the presence of some corporate £IG supply limited/countered the richening move.
• SONIA futures are flat to 5bp richer, a little off best levels.
• BoE-dated OIS is 0.5-4.0bp softer on the day.
• Looking ahead, the BoE will sell short maturity gilts today. Elsewhere, lower tier domestic data is due.