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GILTS: Sell Off Extends Ahead Of Central Bank Decisions

GILTS
CEEMEABulletUKGlobalFixed Income BulletsRegionMarkets

No counter to the selling pressure, with long positions seemingly being cut ahead of the Fed & BoE decisions.

  • Futures print as low as 100.14. Next support at the Sep 10 low (99.83).
  • Yields 5-8bp higher, front end continues to lead the sell off.
  • 10-Year yields now 12bp off yesterday’s lows after the early Feb base held.
  • BoE-dated OIS prices 2.5bp of cuts for tomorrow, 46.5bp of cuts through year end and 126bp of cuts through June ’25.
  • That compares to 4.5bp, 50.5bp and 136bp late yesterday.
  • The Fed presents pronounced overnight event risk given the unusually balanced pricing heading into the event (~40bp of cuts priced).
  • Slightly further out, the BoE is expected to leave bank rate unchanged tomorrow. In that case, GBP STIRs are set to look to the vote split and any accompanying guidance. Our macro team has identified a baseline of 2 MPC members voting for a cut.
  • Gilts will also have to react to any alterations to the BoE’s QT scheme. Consensus looks for a GBP100bln stock reduction, while we look for a slightly more aggressive GBP110bln.
  • We have flagged tightening risks for longer dated gilt swap spreads ahead of the announcement.
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No counter to the selling pressure, with long positions seemingly being cut ahead of the Fed & BoE decisions.

  • Futures print as low as 100.14. Next support at the Sep 10 low (99.83).
  • Yields 5-8bp higher, front end continues to lead the sell off.
  • 10-Year yields now 12bp off yesterday’s lows after the early Feb base held.
  • BoE-dated OIS prices 2.5bp of cuts for tomorrow, 46.5bp of cuts through year end and 126bp of cuts through June ’25.
  • That compares to 4.5bp, 50.5bp and 136bp late yesterday.
  • The Fed presents pronounced overnight event risk given the unusually balanced pricing heading into the event (~40bp of cuts priced).
  • Slightly further out, the BoE is expected to leave bank rate unchanged tomorrow. In that case, GBP STIRs are set to look to the vote split and any accompanying guidance. Our macro team has identified a baseline of 2 MPC members voting for a cut.
  • Gilts will also have to react to any alterations to the BoE’s QT scheme. Consensus looks for a GBP100bln stock reduction, while we look for a slightly more aggressive GBP110bln.
  • We have flagged tightening risks for longer dated gilt swap spreads ahead of the announcement.