GILTS: Soft Reception Of 10-Year Auction Weighs In Recent Trade, Off Lows

Gilts are softer this morning, although they have recovered from session lows.

• Gilt futures -21 at 93.81 vs. lows of 93.53.
• Yields 1-2bp higher across the curve, 10s lead the sell off.
• Spread vs. Bunds little changed around 206bp.
• Early weakness and subsequent recovery from lows seemed to be tied to broader movement in core global FI markets.
• Fresh selling pressure then emerged after the latest 10-Year gilt auction saw a lower cover ratio vs. the previous auction, while the lowest accepted price was below pre-auction mids.
• Those results won’t help sentiment following the large increase in issuance announced last week.
• Recent comments from the OBR suggested that post-Budget market moves have matched their expectations.
• BoE-dated OIS is little changed to 3bp less dovish on the day, showing 22.5bp of cuts for Thursday, 30.5bp of cuts through year-end, 57bp of easing through March and 75bp of easing through June.
• SONIA futures +0.25 to -4.5.  Still not retesting last week’s lows.
• No impact from lower tier domestic data and final services/composite PMI prints (latter saw marginal upward revisions).
• The remainder of the session will see eyes on spillover from any potential last minute pre-U.S. election positioning.