Holding Off Morning Lows

Gilt futures stick to the range established this morning, even with TY and Bund futures registering fresh session lows during the London afternoon.

• Futures last -22 at 98.49, with bears unable to force a test of yesterday’s low.
• This morning’s firmer-than-expected UK services CPI data provided the major driver today, while the closure of U.S. cash markets has limited wider market swings.
• The services CPI data was also firmer than the BoE’s own projections, providing some hawkish risks ahead of tomorrow’s MPC decision.
• We believe that the data effectively cements a steady 7-2 vote, in favour of leaving interest rates unchanged.
• Our full BoE preview can be found here.
• Cash gilt yields are 3-5bp higher, with the post-data flattening bias maintained.
• BoE-dated OIS shows ~42bp of ’24 cuts vs. closer to 45bp late yesterday.
• Further forwards, market implied odds of a 25bp cut through the August meeting sit at ~30%, with the first full 25bp move still not fully discounted until the end of the November meeting.
• SONIA futures are 0.5 to 3.0 lower.