How could the remit impact curves?

• The expectations that we have seen from the sell-side for the gilt remit range from GBP225.5bln to GBP271.4bln. This is a relatively wide range, although it is partly skewed by Barclays who look for a remit almost GBP15bln smaller than any of the other sell side previews that we read.
• The median estimate from the 10 estimates that we have seen comes in at GBP257bln (which is just under GBP20bln larger than the GBP237.2bln gilt remit for 2023/24).
• The distribution of this is likely to impact gilt curves today, too.
• Most analysts are looking for linker issuance in the GBP25-31bln range and longs in the GBP47-56bln range. Anything outside of these ranges is likely to see a decent move. We will be focused particularly on the 10s30s curve. We would expect a steepening/flattening of this irrespective of the supply of mediums if we are outside the GBP47-56bln range. We think there are asymmetric risks here - so a larger increase-than-expected in long-dated issuance would see a bigger move than a smaller-than-expected target of longs.
• In terms of mediums / shorts, we could see a decent move in the 5s10s curve if we see a surprise in the relative size of the buckets versus expectations. We think there is two-way risk here.
• For mediums, there is a relatively narrow range of GBP74.4bln to 79.8bln from analyst previews that we have read (with one exception). This would be GBP6-11bln higher than the 2023/24 fiscal year. Anything outside of this range could see some movement in 10-year yields (and hence gilt futures) although we expect any change in medium-dated issuance away from consensus will see smaller moves than that of long/linker issuance.
• For shorts, there is a split in expectation. Increases of around GBP5bln are seen by BofA, JP Morgan, TD Securities. However, for those who look for increases of GBP20bln+ in the gilt remit (Deutsche, NWM, RBC, UBS) there is an GBP11-14bln increase in short issuance expected. We think that the market is probably looking for closer to GBP10bln here.

For the full MNI Budget Preview click here.