Futures See fresh Session Highs, Most Favour A BoE Hike Tomorrow, Markets Price Coin Toss

Gilt futures move to fresh session highs in recent dealing, last sitting +95 on the day, with the reassessment of the BoE outlook post-CPI dominating.

• Futures have recovered from yesterday’s low but for now remain below resistance at 96.49, the Sep 14 high. A break of this resistance is required to confirm a resumption of the bull cycle that started Aug 17 and this would open the 97.00 handle. Key short-term support has been defined at Monday’s 94.64 low.
• Cash Gilts run 5.5-15.5bp richer, with the curve bull steepening, although the short end of the gilt curve is a little off richest levels of the day.
• Both the 2s10s and 5s30s curves operate off steepest levels of the day, after the 2s10s curve tagged the least inverted level seen over the last few weeks, while 5s30s hit the steepest level since June.
• SONIA futures last show 10.5-19.5bp richer through the blues, with the reds leading.
• 13bp of tightening is showing for tomorrow’s MPC (52% odds of tightening is priced), while terminal policy rate pricing shows below the 5.50% mark in recent dealing i.e. one more 25bp hike is no longer fully discounted for the current cycle.
• The sell-side notes that we have seen still point to a hike tomorrow, although with far less conviction in the wake of today’s softer than expected inflation readings.