Gilts & EGBs Holding Firmer

Technical breaks/momentum and the potential for a lower European borrowing requirement surrounding financial support for Ukraine have combined to support EGBs this morning.

• Fresh multi-month lows have been seen across many of the major 10-Year EGB yield measures. 10-Year German yields sit ~1bp off YtD lows.
• Support from a bid in gilts has also fed in.
• Bund futures are +35 or so at 138.25, ~5 ticks off best levels, with bulls now eying the next projection resistance (138.49). German yields are 1-5bp lower on the day, with a bull flattening bias evident.
• EGB spreads to Bunds are generally little changed to a touch wider. French and Belgian paper provide the exceptions, tightening a little on the day.
• ECB-dated OIS is a little softer on the day alongside the rally in EGBs, with ~167bp of cuts now priced for ’24.
• UK paper firms on the back of a wider airing of dovish Thursday comments from BoE MPC dissenting hawk Haskel, with some modest counter from continued speculation surrounding pre-election fiscal loosening. Gilt futures last show +35 around 103.60, ~25 ticks off the top of its ~70-tick range. A break of today’s existing high would expose 104.00.
• Cash gilt yields are 4-8bp lower on the day, with the curve bull steepening.
• BoE-dated OIS moves in a dovish direction, with ~149bp of cuts showing through ’24 at typing.
• There isn’t much in the way of scheduled European and UK risk events to note today.