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Gilts recede from supply-led highs

BOND SUMMARY
  • The main move in core fixed income came on the gilt open, with the futures contract briefly breaching 129.00 (129.09 high). This was the highest level since 11 March with the move triggered by a bigger than expected revision lower for the gilt remit. Around GBP20bln less issuance had been expected due to stronger than expected outturn data for central government net cash requirements (CGNCR) for FY20/21, but the gilt remit was actually revised GBP43.3bln lower. UK retail sales data for March was also stronger than expected.
  • However, within around 15 minutes of the open, these moves were reversed and gilts have traded largely in line with other core fixed income since (which is generally flat on the day). Peripheral spreads are marginally wider on the day.
  • In terms of other data, PMI data has generally been better than expected today with the French services PMI the highlight, coming in at 50.4 against expectations of 46.7. Looking ahead there is not much other than the US PMI and some speeches on climate change at COP26 with Yellen and Lagarde the most relevant for the market.
  • TY1 futures are down -0-0+ today at 132-17 with 10y UST yields up 1.9bp at 1.559% and 2y yields up 0.1bp at 0.150%.
  • Bund futures are up 0.03 today at 170.97 with 10y Bund yields down -1.4bp at -0.268% and Schatz yields down -0.4bp at -0.699%.
  • Gilt futures are up 0.04 today at 128.84 with 10y yields down -1.2bp at 0.727% and 2y yields down -1.1bp at 0.027%.
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