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GILTS: Bear Steepening, Yesterday's Low Breached In Futures, Wider To Bunds

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

Spill over from Tsy trade weighed on gilts at the open.

  • Several factors then added further pressure:
  • A break of initial technical support at yesterday’s low in futures.
  • Cross-market selling interest vs. Bunds in light of the dovish ECB repricing covered elsewhere.
  • Speculation surrounding increased UK government spending on public sector pensions.
  • Futures trade as low as 96.38, next meaningful support at the Oct 10 low/bear trigger (95.83).
  • Yields 2.0-3.5bp higher, curve steeper. Yesterday’s highs in 2s10s and 5s30s untouched.
  • Gilt/Bund Spread above 188bp (over 3.5bp wider) after the first close below 185bp since September on Tuesday.
  • Mar-27 supply was digested smoothly.
  • Early dovish repricing on BoE OIS strip more than reversed, contracts little changed to 3bp more hawkish on the day. ~24bp of cuts priced for November, 41bp showing through year-end and 111bp of cuts priced through June.
  • SONIA futures flat to -5.0.
  • BoE’s Breeden will speak on “Global priorities in financial sector regulation” (14:00 London), with the subject of the address seemingly set to limit the scope for meaningful monetary policy comments. BoE Governor Bailey will then speak via a fireside chat at the IIF after the close (19:45).
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Spill over from Tsy trade weighed on gilts at the open.

  • Several factors then added further pressure:
  • A break of initial technical support at yesterday’s low in futures.
  • Cross-market selling interest vs. Bunds in light of the dovish ECB repricing covered elsewhere.
  • Speculation surrounding increased UK government spending on public sector pensions.
  • Futures trade as low as 96.38, next meaningful support at the Oct 10 low/bear trigger (95.83).
  • Yields 2.0-3.5bp higher, curve steeper. Yesterday’s highs in 2s10s and 5s30s untouched.
  • Gilt/Bund Spread above 188bp (over 3.5bp wider) after the first close below 185bp since September on Tuesday.
  • Mar-27 supply was digested smoothly.
  • Early dovish repricing on BoE OIS strip more than reversed, contracts little changed to 3bp more hawkish on the day. ~24bp of cuts priced for November, 41bp showing through year-end and 111bp of cuts priced through June.
  • SONIA futures flat to -5.0.
  • BoE’s Breeden will speak on “Global priorities in financial sector regulation” (14:00 London), with the subject of the address seemingly set to limit the scope for meaningful monetary policy comments. BoE Governor Bailey will then speak via a fireside chat at the IIF after the close (19:45).