GILTS: Mid-Range, Wide Tail At Latest Gilt Auction Counters Rally

Gilts soften from recovery highs, Futures last -41 at 93.41 (93.19-64 range).

• The November 6 low (92.53) presents the key bearish target on any extension lower.
• Initial meaningful resistance not seen until the November 1 high (94.73).
• Yields flat to 2bp higher. Belly under the most pressure.
• Bears unable to force a retest of November highs across benchmark yields.
• The pullback was aided by the presence of and results from the auction that introduced the new 4.375% Mar-28 line, which saw decent cover (above 3.00x), although the tail was relatively wide (1bp).
• BoE hawk Mann then reaffirmed her stance, stressing that inflation has not been vanquished, with headline readings masking the underlying price dynamics.
• There was only modest feedthrough from her comments, with Mann already known as the most hawkish voice on the MPC.
• BoE-dated OIS pricing 2.5bp of cuts for next month, 24.5bp through March, 42bp through June and 57.5bp through Dec ’25.
• SONIA futures at lows, last down 0.25-6.0. Some white and red contracts have tested/pierced November lows.
• U.S. CPI data headlines the macro calendar during the remainder of Wednesday trade.