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GILTS: Initial, Modest Post-Auction Weakness In 5s Quickly Reversed

GILTS
CEEMEABulletUKMarketsFixed Income Bullets

The GBP3.75bln auction of the 4.125% Jul-29 gilt generates demand metrics that are in line with the recent norms, although that is perhaps slightly disappointing, given that the auction was slightly smaller than the typical GBP4bln reopening of the line.

  • The cover ratio registered the lowest level seen since the August offering of the bond.
  • Tails at auctions of this line had widened a little during H224 (when compared to the H1 average), and this auction’s 0.8bp yield tail was in line with what seen last time out.
  • Low price a little below prevailing mids seen ahead of the auction, with the average price matching prevailing mids. The line matched the low price of the auction shortly after the results were confirmed, but has since recovered.
  • Yield on the line now little changed vs. pre-auction levels, ~1.5bp below early session highs.
  • Initial reaction saw ~0.5bp of cheapening for 5s on the 2-/5-/10-Year fly, although that move quickly faded. That structure is still over 1bp higher on the day, owing to the combination of the data-driven hawkish repricing in the short end and setup for the supply.
  • A reminder that this offering rounds off the DMO’s coupon supply for calendar ’24.
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The GBP3.75bln auction of the 4.125% Jul-29 gilt generates demand metrics that are in line with the recent norms, although that is perhaps slightly disappointing, given that the auction was slightly smaller than the typical GBP4bln reopening of the line.

  • The cover ratio registered the lowest level seen since the August offering of the bond.
  • Tails at auctions of this line had widened a little during H224 (when compared to the H1 average), and this auction’s 0.8bp yield tail was in line with what seen last time out.
  • Low price a little below prevailing mids seen ahead of the auction, with the average price matching prevailing mids. The line matched the low price of the auction shortly after the results were confirmed, but has since recovered.
  • Yield on the line now little changed vs. pre-auction levels, ~1.5bp below early session highs.
  • Initial reaction saw ~0.5bp of cheapening for 5s on the 2-/5-/10-Year fly, although that move quickly faded. That structure is still over 1bp higher on the day, owing to the combination of the data-driven hawkish repricing in the short end and setup for the supply.
  • A reminder that this offering rounds off the DMO’s coupon supply for calendar ’24.