GILTS: Volatile Start As Bailey, PMIs & Fiscal Risk Assessed, Yields Higher

{GB} GILTS: The softer-than-expected UK PMI data saw gilts move back into positive territory, although opening gap lower in futures didn’t quite close and the knee-jerk bid seen on the data fades.

• Details of the PMIs were a little less concrete than the headline figure, limiting any lasting dovish feedthrough, particularly with the headline metrics still sitting in expansionary territory.
• We had previously noted that the fiscal worry generated by the Guardian sources report at the open was probably a little overdone given the likely spread of any related spending increases and pre-existing expectations.
• Late Tuesday comments from BoE Governor Bailey were dovish on net, but had little lasting impact given the focus on fiscal matters.
• Futures last -17 at 96.08.
• Note the bear trigger (95.83) was breached today, deepening the bearish technical picture.
• Initial support now seen at today’s low (95.70), while resistance comes in some way above prevailing levels at the 20-day EMA (97.46).
• Yields 2-3bp higher, curve steeper. 10+-Year yields hit the highest levels seen since May/June during the early sell off.
• BoE-dated OIS flat to 2bp less dovish on the day, showing 23bp of cuts for November, 40bp of cuts through year-end and 109bp of cuts through June.
• SONIA futures flat to -1.0.
• GBP STIRs have generally followed swings in gilts.