Little Changed To A Touch Firmer, 5-Year Supply Easily Digested

Adjustments to yesterday’s late move higher in oil markets and the RBA decision applied modest pressure to gilts in early trade. The presence of 5-Year gilt supply also weighed into the bidding dealing.

• There were no signs of RV concession ahead of this morning’s 5-Year gilt auction, but that didn’t prevent solid demand and pricing metrics, allowing gilts to move away from session lows.
• Futures last unchanged at 98.33, sticking within the lower end of yesterday’s range.
• Friday’s low in the contract (98.21) held late on Monday.
• Zooming out, last week’s rally in gilt futures instilled a bullish theme, resulting in a print above the May 16 high (98.89). A clear break of this hurdle would reinforce bullish conditions. Conversely, initial firm support is seen at the 20-day EMA (97.45).
• Cash gilt yields are little changed to 2bp lower on the day, flattening.
• Gilts see some light outperformance vs. core global peers across the curve.
• SONIA futures are either side of unchanged, while BoE-dated OIS is little changed on the day, showing just over 40bp of cuts through year end.
• Kantar’s food price inflation metric moderated for a sixteenth consecutive month, printing +2.1% Y/Y, a welcome sign for policymakers.
• Brightmine wage data will hit in the early hours of Wednesday morning.
• Further out, tomorrow’s CPI data and Thursday’s BoE decision headline this week’s UK schedule. Expect our previews of those events later today.