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GILTS: Bull Steepening On CPI

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

Gilts rally on the back of the softer-than-expected CPI data detailed in earlier bullets.

  • Futures as high as 97.75 before easing back to ~97.60.
  • Yields 4-9bp higher, curve bull steepens on the dovish BoE repricing.
  • 2s10s and 5s30s still shy of multi-week highs.
  • BoE-dated OIS hold the bulk of the early dovish move, showing ~24.5bp of cuts for November, 41.5bp of cuts through December and 114bp of cuts through June.
  • SONIA futures remain underpinned but trade off session highs, 1.5-12.5 firmer vs. settlement.
  • Upside expressions favoured in SONIA options (detailed in a recent bullet).
  • Digestion of the CPI data is set to dominate through the morning.
  • We have already noted that we don't think this data opens up the prospect of a 50bp cut any time soon.
  • We would only really view the data as a marginal downside surprise on an underlying basis and we think that markets will probably overreact in the short-term.
  • Outside of the CPI data, various source reports have pointed to GBP40bln of tax hikes and spending cuts in this month’s Budget,
  • Elsewhere, GBP3.5bln of 4.00% Oct-31 gilt supply is due this morning.
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Gilts rally on the back of the softer-than-expected CPI data detailed in earlier bullets.

  • Futures as high as 97.75 before easing back to ~97.60.
  • Yields 4-9bp higher, curve bull steepens on the dovish BoE repricing.
  • 2s10s and 5s30s still shy of multi-week highs.
  • BoE-dated OIS hold the bulk of the early dovish move, showing ~24.5bp of cuts for November, 41.5bp of cuts through December and 114bp of cuts through June.
  • SONIA futures remain underpinned but trade off session highs, 1.5-12.5 firmer vs. settlement.
  • Upside expressions favoured in SONIA options (detailed in a recent bullet).
  • Digestion of the CPI data is set to dominate through the morning.
  • We have already noted that we don't think this data opens up the prospect of a 50bp cut any time soon.
  • We would only really view the data as a marginal downside surprise on an underlying basis and we think that markets will probably overreact in the short-term.
  • Outside of the CPI data, various source reports have pointed to GBP40bln of tax hikes and spending cuts in this month’s Budget,
  • Elsewhere, GBP3.5bln of 4.00% Oct-31 gilt supply is due this morning.