GILTS: Off Highs, Global Cues Dominate

Gilts have taken cues from moves in wider core global FI markets.

• Initially rallying on the nomination of Scott Bessent for U.S. Tsy Secretary (policy preferences deemed less inflationary than some of his former fellow contenders) before selling off as EGBs pulled away from highs (OAT-led as French fiscal/political risks intensify).
• Gilt futures last +27 at 94.75 vs. highs of 94.95.
• Fresh extension higher in futures would target round number resistance (95.00) followed by the 50-day EMA (95.78 today). A break of the latter would increase the threat to the bearish technical picture.
• Yields little changed to 1.5bp lower, curve bull flattens.
• 10s registered 4.35%, a level that had not been seen since October 31. The benchmark topped out at 4.594% on November 6, in the aftermath of Trump’s election victory.
• SONIA futures have generally tracked gilts, last -1.0 to +3.0, light twist flattening.
• BoE-dated OIS 0.5-1.5bp more hawkish on the day, last showing 75.5bp of cuts through December ’25, with the next 25bp move fully discounted through the March ’25 MPC.
• BoE’s Lombardelli offered little new this morning, supporting gradual rate cuts and outlining greater worry surrounding hawkish developments than dovish surprises.
• Dovish dissenter BoE Dhingra will speak on a panel shortly.