September 19, 2024 07:34 GMT
GILTS: Curve Steepens After Fed
GILTS
Gilts steepen, spill over from U.S. curve seen post-Fed.
- Lows of 100.07 in futures before a move back to ~100.25.
- Initial support was broken during yesterday’s sell off, although technicals in the contract remain bullish.
- Next support comes in at the 20-day EMA (100.03), while initial resistance is located at yesterday’s high (101.06).
- Yields flat to -3bp.
- BoE-dated OIS is little changed to a couple of bp more dovish vs. yesterday’s closing levels. ~2.5bp of cuts priced for today’s decision, ~48bp of cuts showing through year-end (see our pre-gilt open bullet for more colour there).
- The BoE is unanimously expected to leave bank rate unchanged today.
- Focus will quickly move to the vote split (our macro team looks for 2 dovish dissenters) and accompanying rhetoric.
- The QT decision will also provide some interest.
- Our macro team’s baseline scenario looks for a ~GBP110bln BoE QT pace during Oct ’24-Sep ’25 (vs. consensus of GBP100bln).
- We outlined the QT announcement’s potential impact on swap spreads yesterday.
- We will provide more on the announcement’s potential impact on outright gilts this morning.
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