Futures Through Resistance

Gilt futures have moved through the previously covered resistance area (50-day EMA at 97.65) to last trade +75 at 97.71. Highs of 97.75 seen, with bulls looking to target 98.00 on any extension higher.

• Yields are 4-6bp lower across the curve, light bull flattening.
• Benchmark yields are 16-24bp off last week’s highs, with most a little below the midpoint of their respective April ranges. The most pronounced pullback has come in the short end and belly.
• Cross-market, gilts outperform Bunds.
• Some of that is related to catch up after the long London weekend, but some of the move represents gilt outperformance, with the 2-Year gilt/Schatz spread ~1.5bp through Friday’s lows, aided by the movement in GBP STIRs.
• SONIA futures are little changed to 8.0bp firmer, at/just off session highs.
• BoE-dated OIS shows ~55bp of ‘24 cuts.
• Further forwards, pricing for this week’s BoE is essentially flat, with ~11bp of cuts showing through the June MPC and a 25bp cut fully discounted come the end of the August meeting.
• Expect our full preview of that event later today.