Futures Respect Last Week’s Low

Gilt futures trade in a similar manner to SONIA markets, initially showing lower before recovering to sit in line with, to a touch above, late Monday levels.

• Last week’s low (97.48) wasn’t quite tested, before the contract recovered to 97.60, operating in a narrow 11-tick range.
• Cash gilt yields are 0.5-1.0bp lower across the curve.
• The impact of the firmer-than-expected headline UK wage metrics is being countered by the 3-month private sector wage figure, which printed below the BoE’s forecast (see earlier bullets for more colour on that dataset).
• Unemployment also ticked higher, matching wider expectations.
• We view this as another hurdle cleared when it comes to the potential for a June rate cut.
• However, last week’s MPC meeting de-emphasised labour market data somewhat, with services CPI taking on even more importance and PMI data on costs/output prices becoming increasingly meaningful.
• BoE chief economist Pill will speak shortly (08:30 London), but he has already appeared post-MPC. Furthermore, his appearance at the Chartered Accountants Economic Summit has no text scheduled, so it is unlikely to be an appearance that sees a meaningful change in tone.
• GBP600mn of 0.125% Mar-73 I/L supply is also due today.
• U.S. PPI data will generate cross-market interest.