Light Bear Flattening Seen As Gilts Catch Up To Wider Cheapening

Gilts cheapen by 3-4bp across the curve, initially catching up to the Tsy/Bund weakness observed since Friday’s close, before extending. That leaves futures -40 or so, comfortably within the range observed last week.

• The CBI has upgraded its economic outlook for the UK, and now expects a recession to be avoided, although it cautions over some long-term issues. The body noted that business investment is set to rise, reaching pre-crisis levels by end of 2024, while it warned that its GDP forecasts suggest that the economy is persistently “scarred” from the COVID-19 pandemic.
• Elsewhere, local headline flow is centred on politics, with long running issues surrounding former PM Johnson and matters north of the Scottish border at the fore.
• BoE-dated OIS continues to show just over 100bp of tightening during the remainder of the current cycle, while BoE MPC member Haskel offered his latest hawkish musings in a piece published in The Spectator (more on that shortly).
• An address from BoE’s Mann will cross later today.