GILTS: Ukraine War-Driven Rally Fades A Little, Curve Flatter

The latest escalation in the Russian-Ukraine war (the first Ukrainian ATACMS strike within Russia) has driven a rally in core global FI markets, although the move has faded from highs.

• Gilt futures last +51 at 94.25 vs. highs of 94.64.
• Initial resistance at the 20-day EMA (94.55) was pierced, key resistance at the November 1 high (94.73) remains untouched.
• Yields 2-5bp lower, curve bull flattens.
• 2s10s and 5s30s comfortably within multi-week ranges.
• Gilt/Bunds ~2bp wider at ~211bp, gilts lag Bunds owing to relative sensitivity to the Russia-Ukraine war. Spread cycle closing highs (215.8bp) intact.
• There was a 0.6bp tail at this morning’s 3.75% Jan-38 gilt auction, with the low price below pre-auction mids. There wasn’t much of a tangible market reaction. The results were likely deemed somewhat acceptable given the ~7bp rally into the offering.
• SONIA futures tracking swings in wider core global FI, last 0.25-6.0 firmer.
• BoE-dated OIS little changed to 3bp more dovish on the day, fully discounting the next cut through March and showing 69bp of cuts through ’25.
• The latest TSC hearing is ongoing, with BoE’s Bailey, Lombardelli, Mann & Taylor in attendance.
• UK CPI data presents the next key risk event on the local calendar (due 07:00 Wednesday), expect our full preview later today.