GILTS: 10-Year Yields Just Above Key Support Cluster, BoE Pricing & QT Pace Eyed

10-Year gilt yields sit at ~3.77%, just above recent double bottom support (3.742%) and the early February low (3.726%).

• The benchmark is ~30bp below its September peak.
• Looking forwards, the Fed’s latest monetary policy decision headlines this week’s macro schedule, but local CPI data (Wednesday) the BoE monetary policy decision (Thursday) reintroduce domestic risk events.
• While the vote split is set to garner the bulk of the initial attention at the BoE decision (expectations for unchanged rates, ~20% odds of a 25bp cut priced, larger market reaction likely if more than two MPC members vote for a cut), focus will quickly move to its annual decision on the pace of QT over the coming year (Oct ’24-Sep ’25).
• The very loose early consensus looks for around a GBP100bln stock reduction (GBP13bln active gilt sales). We look for a higher GBP110bln stock reduction. We have seen sell-side estimates ranging from GBP87bln (ending active sales, but not reinvesting) to GBP137bln (keeping active sales at their current pace).
• A net dovish outcome could catalyse a move through the levels flagged above, which would expose the ’24 low (3.594%).
• Note that the Mar ’25 SONIA contract (SFIH5) continues to respect early August highs, watch there for cues further out the SONIA strip and gilt curve.

Fig. 1: UK 10-Year Gilt Yield (%)