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GILTS: Outperformance Holds Post-Bailey, Off Session Highs

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

Gilt outperformance remains evident after BoE Governor Bailey opened the door to more activist rate cuts, if the inflation data allows.

  • Gilt futures trade as high 98.53 before fading back to 98.30 with wider core global FI markets under pressure and some questioning the degree of commitment to swifter cuts in Bailey’s comments.
  • The bearish technical threat remains.
  • Yesterday’s low (97.97) provides initial support, while bulls really need to overcome the Oct 1 high (99.47) to start turning the technical tide more in their favour.
  • Yields 5bp lower to 1bp higher, curve twist steepening
  • 10-Year gilt/Bunds back below 190bp, narrowing by 5bp from cycle wides registered on Wednesday.
  • We still don’t think that the idea of 50bp BoE cuts is warranted at this stage.
  • The market agrees with our view, with odds of sequential, as opposed to upsized, cuts rising this morning.
  • BoE-dated OIS prices 25bp of easing for November, 42bp of cuts through December and 122.5bp of cuts through June ’25.
  • SONIA futures are 1.0-8.5 firmer on the day, back from early session highs.
  • U.S. data and Fedspeak headlines the macro calendar today, while the next UK risk event of note comes in the form of tomorrow’s appearance from BoE chief economist Pill.
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Gilt outperformance remains evident after BoE Governor Bailey opened the door to more activist rate cuts, if the inflation data allows.

  • Gilt futures trade as high 98.53 before fading back to 98.30 with wider core global FI markets under pressure and some questioning the degree of commitment to swifter cuts in Bailey’s comments.
  • The bearish technical threat remains.
  • Yesterday’s low (97.97) provides initial support, while bulls really need to overcome the Oct 1 high (99.47) to start turning the technical tide more in their favour.
  • Yields 5bp lower to 1bp higher, curve twist steepening
  • 10-Year gilt/Bunds back below 190bp, narrowing by 5bp from cycle wides registered on Wednesday.
  • We still don’t think that the idea of 50bp BoE cuts is warranted at this stage.
  • The market agrees with our view, with odds of sequential, as opposed to upsized, cuts rising this morning.
  • BoE-dated OIS prices 25bp of easing for November, 42bp of cuts through December and 122.5bp of cuts through June ’25.
  • SONIA futures are 1.0-8.5 firmer on the day, back from early session highs.
  • U.S. data and Fedspeak headlines the macro calendar today, while the next UK risk event of note comes in the form of tomorrow’s appearance from BoE chief economist Pill.