Light Bid On European PMIs

Gilts lean on the bid seen in EGBs for support in early trade today, with a softer-than-expected rounds of French & German PMI data facilitating the move.

• Futures last trade +10 or so, ~20 ticks off reaction highs, with yesterday’s shallow post-settlement downtick more than reversed.
• The contract sticks comfortably within the confines of yesterday’s range.
• Cash gilt yields run 1bp higher to 3.5bp lower as the curve twist flattens.
• 2s and 10s failed to test May yield support areas we have flagged in recent sessions during post-BoE trade (4.135% for 2s and 3.624% for 10s).
• SONIA futures now run +1.0 oi -2.0 on the day, twist steepening, while BoE-dated OIS sits little changed to 2bp softer vs. levels we flagged pre-gilt open, as the European data applies to some light dovish pressure.
• Local headline flow has been fairly limited overnight, with GfK consumer confidence data matching exp., residing comfortably in negative territory.
• Flash PMI data headlines the UK data docket today. Elsewhere, BoE Deputy Governor Ramsden will speak.