Light Steepening To Start, Yields Close To Unchanged

Gilt futures are now a touch lower vs. late Monday levels after the stronger-than-expected German factory orders data and today’s EGB supply burden helps Bund counterparts away from best levels of the day. Also note that GBP2.5bn of 1.50% Jul-53 green gilt supply needs to absorbed on the domestic front.

• The above matters countered an early uptick in gilt futures, leaving the contract +32, a handful of ticks off the base of its early 98.03-27 range.
• Our technical analyst notes that gilt futures traded sharply lower Friday and again yesterday, highlighting a clear bearish threat. The move lower has defined a key short-term resistance at 100.62, the Feb 1 high. A break of this level is required to reinstate the recent bullish theme and would open 100.76, 50.0% of the Dec 27 - Jan 25 bear leg. Key support and the bear trigger lies at 97.57, the Jan 25 low.
• Cash gilt yields are flat to 1bp higher vs. closing levels, with a modest steepening bias. 10s pin themselves at 4.00% early today, after the early ’24 high went untouched on Monday.
• SONIA futures are off best levels, printing flat to +3.5 through the blues.
• BoE-dated OIS is flat to ~32bp softer across ’24 contracts, with little net movement vs. pre-gilt open levels (~85bp of cuts priced for ’24).
• The BoE’s quarterly APF report headlines a very slim local release docket on Tuesday. That shouldn’t be a needle mover.