GILTS: Off Post-PMI Highs, Still Well Bid On The Day

Gilts off highs after softer-than-expected European & UK PMI data pushed both futures and 10-Year yields to fresh November lows.

• Upside risks to inflation noted within PMI report helped temper the rally.
• Futures last +53 at 94.58 vs. session highs of 94.90.
• November 1 high (94.73) pierced, fresh extension higher would target round number resistance (95.00) then the October 10 low (95.83).
• Yields 5-6bp lower on the day, curve a little steeper.
• 10s as low as 4.363% before a move back to 4.385%, next downside level of interest at the October 29 high (4.317%).
• BoE-dated OIS off dovish session extremes.
• 2.5bp of BoE cuts priced for December, 21bp through February, 30bp through March, 53.5bp through June and 76bp of easing through Dec ’25 (60bp of easing was priced through Dec ’25 at one stage on Wednesday).
• Fresh November highs across many SONIA futures, last flat to +5.0.
• We still believe that rate cuts in February and May presents the most likely BoE policy path from here, although today’s data does increase the odds of a more aggressive cutting cycle during ‘25.
• Soft retail sales data seen pre-open but had little impact given its volatile nature.
• Watch for cross-market drivers and macro headline flow into the weekend, with little of note left on the UK calendar.