GILTS: Dips Bought, Macro Risks Eyed

Gilts have been bought on dips, with increased French political and fiscal risk underpinning core global FI markets this morning.

• Spill over from a downtick in equities provides further support.
• Hawkish comments from ECB’s Schnabel were quickly countered, while yesterday evening’s FT interview with BoE’s Lombardelli had little impact.
• Futures (H5) last +64 at 95.57, 95.25-64 range.
• Contract through the first couple of resistance levels (95.42/54). Next resistance located at the 1.764 projection of the Nov 18-19-20 price swing (95.73).
• Zooming out, the trend condition remains bearish, however, a corrective cycle is in play and this week’s climb reinforces current bullish conditions.
• Yields 4-6bp lower.
• 10s below 4.30% for the first time since November 30.
• SONIA futures flat to +6.5.
• BoE-OIS within 1bp of yesterday’s settlement levels. ~2bp of cuts priced for next month, 21.5bp showing through Jan, 30bp through March, 54bp through June and 77bp through Dec ’25.
• Little of note on the UK calendar today, will leave participants focused on macro/cross-market inputs.