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GILTS: Underpinned By Russia-Ukraine Escalation

GILTS
CEEMEABulletUKMarketsFixed Income Bullets

Gilts have rallied on the back of the latest escalation in the Russia-Ukraine war (Russia reportedly using an ICBM), although moves remain limited as odds of a full-blown nuclear escalation remain low at this stage.

  • Futures last +35 at 94.02 vs. session highs of 94.06.
  • Bearish technical theme intact.
  • First resistance of note seen at the 20-day EMA (94.43 today).
  • Yields 2.0-3.5bp lower, 5s outperform.
  • Early outperformance vs. Bunds saw the 10-Year spread below 210bp, but subsequent demand for German paper leaves the spread ~1bp wider on the day, just below 213bp. Closing cycle wides at 215.8bp untested.
  • The GBP2bln 0.125% Jan-26 gilt tender saw the cover ratio top 4.00x and a 0.6bp tail, although the low price was marginally below mids that prevailed ahead of the supply. Markets looked to the solid cover, with no immediate weakness seen after the auction (fresh demand for gilts in general also helped).
  • SONIA futures flat to +4.5, firming alongside gilts.
  • BoE-dated OIS shows ~71bp of cuts through December ’25, with ~19bp priced through February and 27bp priced through March. Contracts are 0.5-3.5bp more dovish on the day.
  • BoE dissenting hawk Mann will speak in a fireside chat this afternoon (14:00), don’t expect her to change her tone if she does comment on monetary policy.
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Gilts have rallied on the back of the latest escalation in the Russia-Ukraine war (Russia reportedly using an ICBM), although moves remain limited as odds of a full-blown nuclear escalation remain low at this stage.

  • Futures last +35 at 94.02 vs. session highs of 94.06.
  • Bearish technical theme intact.
  • First resistance of note seen at the 20-day EMA (94.43 today).
  • Yields 2.0-3.5bp lower, 5s outperform.
  • Early outperformance vs. Bunds saw the 10-Year spread below 210bp, but subsequent demand for German paper leaves the spread ~1bp wider on the day, just below 213bp. Closing cycle wides at 215.8bp untested.
  • The GBP2bln 0.125% Jan-26 gilt tender saw the cover ratio top 4.00x and a 0.6bp tail, although the low price was marginally below mids that prevailed ahead of the supply. Markets looked to the solid cover, with no immediate weakness seen after the auction (fresh demand for gilts in general also helped).
  • SONIA futures flat to +4.5, firming alongside gilts.
  • BoE-dated OIS shows ~71bp of cuts through December ’25, with ~19bp priced through February and 27bp priced through March. Contracts are 0.5-3.5bp more dovish on the day.
  • BoE dissenting hawk Mann will speak in a fireside chat this afternoon (14:00), don’t expect her to change her tone if she does comment on monetary policy.