GILTS: Recovering As Oil Falls And Equities Stall

Gilt futures test yesterday’s high as equities come under pressure and weakness in crude oil futures feeds in, reversing the early weakness.

• Contract last +4 at 100.16, with the Sep 6 high (100.60) providing the next level of meaningful resistance above yesterday’s peak (100.20).
• Yields little changed to 2bp lower across the curve, bull steepening.
• The latest labour market data was generally in line with expectations. This shouldn’t move the need for BoE policy (which has been non-committal to further cuts at this stage).
• Expect our full write up covering the release in due course.
• SONIA futures -1.5 to +2.0.
• BoE-dated OIS shows ~3bp of cuts for this month, ~28bp of cuts through Nov and ~45bp of easing through year end.
• GBP900mln of 0.625% Mar-45 ~I/L gilt supply was smoothly absorbed after some mild pre-auction concession.
• The pre-release of comments from BoE’s Breeden will cross at midday, see our Gilt Week Ahead for further details.
• Beyond there, U.S. inputs (Wednesday’s CPI and tonight’s election debate) and UK GDP data are set to dominate over the next couple of sessions.