September 20, 2024 09:36 GMT
GILTS: Equity Pullback & Mann Softening Hawkish Tone Provide Support
GILTS
A pullback in equities has supported core global FI, gilt futures briefly topped 100.00.
- Our macro team believe that the latest comments from BoE MPC member Mann were a lot less hawkish, providing further support.
- We can’t rule out Mann voting for a cut in November.
- While that wouldn’t change the outcome of the meeting (markets fully discount a 25bp cut) it could change the tone of BoE discussions further out, given that Mann was previously viewed as the most hawkish MPC member.
- The technical bull cycle remains in play for futures.
- Initial support seen at yesterday’s low (99.55), which protects the September 9 low (99.29). Initial resistance at the Sep 18 high (101.06).
- Yields ~2bp lower across the curve.
- STIRs saw some modest dovish adjustments in the wake of Mann’s comments.
- BoE-dated OIS show 26bp of cuts through the Nov MPC, ~40.5bp of easing through year-end and 125bp of cuts through June ’25.
- SONIA futures last -0.5 to +3.0.
- Elsewhere, retail sales data was firmer than expected but shouldn’t change the path of BoE policy.
- Public finance data for August revealed another round of higher-than-expected government borrowing, with risks already tilted to a move higher in the gilt issuance remit.
- Little of note on the UK calendar for the rest of the day.
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