Lagging EGBs In Recent Trade, Early Ranges Intact

Gilt futures remain confined to the range witnessed during the first hour or so of post-Christmas trade, with bulls failing to force a test of the next round number (104.00) thus far.

• The contract last trades +43 at 103.70, 18 ticks off the peak of its 72-tick session range.
• Gilts have underperformed EGBs over the past couple of hours, with 10s now a touch wider on the day vs. Bunds, allowing some early tightening to more than reverse, as several of the major EGB market markers move to fresh cycle extremes.
• The major domestic news flow that we have seen has focused on the timing of the release of the Budget (6 March), which, when coupled with the recent run of speculation in the local press re: fiscal loosening, is set to result in increased speculation re: the timing of the next UK election.
• UK gilt yields are 3-7bp lower on the day, with the front end continuing to outperform.
• This comes with early dovish moves in SONIA futures/BoE-dated OIS remaining mostly intact after late Thursday dovish comments from BoE MPC hawk Haskel (which didn’t get much of an airing on Friday) garnered more attention over the weekend.