Futures Through Key Support On CPI Data

The hawkish repricing following the UK CPI data sees gilt bears initially push futures comfortably below 97.00, basing at 96.83, before retaking 97.00.

• Key support at the May 14 low (97.23) has given way, with any fresh extension lower set to expose the May 3 low (96.43). The latter protects the April 25 low and bear trigger (95.36).
• Cash gilt yields are 7-14bp higher, with 5s leading the sell off.
• Bears will start to eye the April yield highs if fresh weakness is seen.
• 2s10s and 5s30s hit fresh multi-week flats.
• SONIA futures are 0.25 to 15.0bp lower, off initial session lows.
• Late Tuesday saw BoE Governor Bailey suggest that reserves are likely to settle at GBP345-490bn, while he expects a significant uptick in repo operation usage.
• The April Brightmine survey revealed an uptick in in the 3-month Y/Y wage deal reading vs. March (+4.9% from +4.6%)
• Comments from BoE’s Breeden are due later today, although she will appear on a panel focused on macroprudential matters, which will likely limit the scope for broader monetary policy discussions.
• GBP4bn of 4.125% of Jul-29 gilt supply is also due today.