GILTS: Swings In Wider Core Global FI Dominate

Gilts still look to swings in wider core global FI markets for direction, with futures hitting fresh session highs of 94.24 before fading to 94.11.

• Initial resistance of note (20-day EMA at 94.43) remains untouched.
• Yields 2-4bp lower, 5s outperform.
• SONIA futures little changed to +5.0.
• BoE-dated OIS pricing 72bp of cuts through Dec ’25 vs. 67bp early today.
• First 25bp cut ~75% discounted through the February MPC and more than fully discounted come the end of the March meeting.
• We still look for cuts in February and May at this stage.
• Markets price 42.5bp of easing through May, so lean towards our view, but don’t quite fully discount it.
• Hawkish MPC dissenter Mann reiterated her view, pushing for higher for longer interest rates until there is a change in underlying inflation dynamics.
• She is also willing to implement a “large” move in rates when the data permits such action.
• Retail sales data headlines Friday’s UK calendar.
• That shouldn’t be much of a needle mover for BoE policy debate, especially when considered in isolation, given the volatile nature of the reading.