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Free AccessGilts Outperform As BoE's Pill Fails To Push Back On Idea Of Summer '24 Rate Cut
Gilt futures have shown above Monday’s high on a few occasions, although bulls haven’t managed to get near closing Monday’s opening gap lower.
- Futures last +60, just shy of best levels, with bulls eying the October high (95.66) as the next level of meaningful resistance.
- Cash gilt yields are 6.5-9.5bp lower, bull steepening.
- Gilts have outperformed core global FI peers across most of the curve.
- The main factor driving the outperformance has been the delayed digestion of late Monday comments from BoE chief economist Pill.
- A quick reminder that Pill gave a bit of a green light to market pricing of 25bp rate cut come the end of August ’24.
- Elsewhere, his words on inflation and the latest slowing in the domestic Kantar food price inflation metric (which fell into single digits in Y/Y terms) also provided support.
- More widely, weaker oil prices will have also helped the bid.
- The presence of the bidding deadline for the latest round of 10-Year supply helped futures away from best levels, before the clearance of the auction above prevailing mid prices, with a reasonably strong cover ratio, provided fresh support.
- SONIA futures are flat to +11.5 through the blues, with the front of the reds outperforming on the strip.
- BoE-dated OIS is 0.5-12bp softer through the liquid contracts, with terminal policy rate pricing ~6bp above current effective SONIA levels. Pill’s comments have allowed markets to fully discount a 25bp cut come the end of the Aug ’24 MPC.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Dec-23 | 5.234 | +4.7 |
Feb-24 | 5.248 | +6.1 |
Mar-24 | 5.211 | +2.4 |
May-24 | 5.132 | -5.5 |
Jun-24 | 5.047 | -14.0 |
Aug-24 | 4.934 | -25.3 |
Sep-24 | 4.801 | -38.6 |
Nov-24 | 4.660 | -52.7 |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.