GILTS: Early Bid Fades

Gilt futures initially reacted to the uptick in wider core global FI markets at the open, but bulls failed to close yesterday’s opening gap lower.

• That, coupled with a pullback from highs in wider bond markets, counters much of the early bid.
• Futures last +22 at 96.35.
• Bearish trend intact, bulls have to overcome the October 7 high (96.93) to start turning the technical tide. Initial support at yesterday’s low (95.83).
• Yields -0.5bp to +0.5bp, very light twist steepening on the curve.
• SONIA futures back from early highs alongside gilts, last 0.25-3.5 higher.
• BoE-dated OIS still hovering around pre-gilt open levels flagged earlier
• 22bp of cuts showing for Nov, 35.5bp of cuts priced through year-end and 97bp of easing priced through June.
• This morning’s monthly economic activity data had no real impact on markets, given how close to expectations the GDP prints were. There shouldn’t be any impact on monetary policy either.
• Looking forwards, expect fiscal speculation to continue to dominate local headlines, while U.S. PPI data headlines the macro calendar ahead of the weekend.
• The latest round of fiscal-related headline flow sees the FT flag that “since Britain’s July 4 election, directors of listed companies have sold shares at an average rate of GBP31mln a week, more than double the GBP14mln pace of the previous six months,” with Labour CGT plans a key driver.
• Note that Labour has seemingly watered down some of their fiscal tightening plans given the negative reaction/flight risk.