Holding a Little Cheaper On The Day, Syndication Dynamics Eyed, Strong Demand Seen

Gilts participate in the BoJ-inspired weakness in wider core global Fi markets, with that matter applying the bulk of the pressure.

• Futures stick within the range witnessed over the last couple of sessions, through yesterday’s base, last -43 at 98.77, less than 10 ticks off the base of the 26-tick session range.
• Cash gilt yields are 1.0-2.5bp higher on the day, with intermediates leading that move.
• Recovery bids have remained relatively shallow and ranges are generally contained.
• Books are closed on the syndication of the new 4.375% Jul-54 gilt, with the book build already topping GBP70bn per the most recent update from bookrunners. That demand has allowed the spread to be set at the tighter end of the initial guidance range (3.75% Oct-53 gilt +1.75bp). Ahead of the syndication we looked for a GBP4-6bln transaction size.
• The presence of this syndication will be helping cap any rallies.
• SONIA futures are flat to -6.5 through the blues. Operating at/just off session lows.
• BoE-dated OIS is flat to ~3.5bp firmer through ’24 contracts, with ~104bp of cuts priced through ‘24 at present.
• Sizing and allocations surrounding the aforementioned gilt syndication, s well as related hedging activity, should dominate local matters through the remainder of the day.