Free Trial

Gilts Routed Post-CPI; BoE's Bailey, Fed Minutes Eyed Later

BONDS

Gilts have dropped sharply after a much-higher-than-expected UK April inflation print, easily underperforming Bunds and Treasuries in early Wednesday trade.

  • The upside shock in UK CPI (core 6.8% Y/Y vs 6.2% expected) pushed BoE terminal rate pricing up over 40bp at one point to 5.50%, putting 2Y UK yields on course for their biggest rise since Sept 2022 (up 25bp at time of writing to 4.39%) in a strong bear flattening move.
  • Yields are off session highs but given the increasing focus on the BoE's path ahead, Gov Bailey's appearances today (particularly a fireside chat at 1400UK time) will garner additional attention.
  • Treasuries and Bunds have fared better, with the US curve twist steepening and Germany's twist flattening.
  • German IFO was on the weak side of expectations, but appeared to help Bunds bounce from an early UK-related selloff. We hear from ECB's Lagarde later.
  • There's no key US data today, but in Fed communications, we hear from Fed's Waller, and later, the May FOMC minutes (MNI preview is here).
  • In US supply we get $43B in 5Y Note and $22B 2Y FRN auctions.

Latest levels:

  • Jun US 10Y futures (TY) steady at at 113-19.5 (L: 113-13 / H: 113-23.5)
  • Jun Bund futures (RX) up 13 ticks at 134 (L: 133.46 / H: 134.18)
  • Jun Gilt futures (G) down 76 ticks at 96.17 (L: 94.94 / H: 96.26)
  • Italy / German 10-Yr spread 1.1bps wider at 186.3bps

To read the full story

Close

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.