GILTS: Futures Near Key Short-Term Support

Initial support in gilt futures (the April 3 low, 98.16) pierced, before a recovery from lows. Futures -24 at 98.22 (range 98.12-26).

• We warned that the bearish threat remains intact & the contract nears key short-term support (98.05).
• Cash gilt yields 2-3bp higher, light steepening.
• 10s 4.10%, yield resistance seen at the mid-March high (4.125%).
• SONIA futures flat to -3.5, BoE-dated OIS roughly in line with pre-gilt open levels.
• The REC/KPMG labour market report provided the latest signs of a loosening labour market.
• Outgoing DMO chief Stheeman stressed the need to ensure liquidity & stability within the gilt market.
• BoE’s Breeden will speak today (16:30 London), on “towards the future of the monetary system.”
• We will also see GBP800mn of BoE APF short gilt sales.
• This week’s domestic highlights include the release of the Bernanke report (Friday), comments from BoE’s Greene (Thursday) & monthly econ activity data (Friday).