Holding Lower, Geopolitics Dominates

Gilts maintain the bulk of their early Monday losses, with the Israel-Iran situation avoiding the worst-case scenario, at least for now.

• Gilt futures last -58 at 97.35 (97.23-51 range). The initial support cluster lies at the Feb 29/Apr 11 low (96.83/82).
• Cash gilt yields are 2.0-5.5bp higher, with 2s10s steepening more than 5s30s.
• SONIA futures also hold the bulk of today’s early losses, last 0.5-6.5 lower.
• BoE-dated OIS sits off session extremes, showing ~53bp of ’24 cuts vs. closer to 55bp late Friday.
• Local headline flow has not been consequential for markets, offering little new.
• Looking ahead, comments from BoE’s Breeden shouldn’t be a market mover as they are set to focus on the payments system.
• We will also see the BoE sell GBP600mn of gilts from its APF holdings later today (stepped down from the GBP650mn offerings in Q1).
• That leaves tomorrow’s labour market report as the first major scheduled domestic risk event of the week, with focus set to fall on wage dynamics ahead of Wednesday’s CPI release.