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Lower Ahead Of BoE, Futures Still Above Initial Support

GILTS
HomepageBond Market NewsBulletMarketsFixed Income Bullets

Gilts trade lower alongside global peers.

  • The contract last trades -20 at 98.32.
  • Support is seen at the Jun 14/17 low (96.21).
  • Cash gilt yields are ~3bp higher across the curve.
  • An FT piece covering comments from fund managers suggests that “Labour could borrow more without UK bond market backlash.”
  • While the memory of former PM Truss’ mini-Budget looms large, the fund managers generally suggest that there is some scope for some growth-supportive borrowing (focused on investment, for instance), albeit with a need for caution stressed.
  • The fund managers also point to space to relax fiscal rules, although such a move is unlikely to come early in Labour’s first term (assuming the party is victorious in the July election).
  • Looking ahead, we believe that yesterday’s CPI data cements an unchanged 7-2 vote at today’s BoE decision, with rates set to be left unchanged.
  • Yesterday’s services CPI reading will present the major point of worry for the MPC, after it topped BoE and wider sell-side expectations.
  • We don’t think the data will provide a meaningful change to the BoE’s guidance/ overarching view, but that outcome cannot be completely ruled out.
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Gilts trade lower alongside global peers.

  • The contract last trades -20 at 98.32.
  • Support is seen at the Jun 14/17 low (96.21).
  • Cash gilt yields are ~3bp higher across the curve.
  • An FT piece covering comments from fund managers suggests that “Labour could borrow more without UK bond market backlash.”
  • While the memory of former PM Truss’ mini-Budget looms large, the fund managers generally suggest that there is some scope for some growth-supportive borrowing (focused on investment, for instance), albeit with a need for caution stressed.
  • The fund managers also point to space to relax fiscal rules, although such a move is unlikely to come early in Labour’s first term (assuming the party is victorious in the July election).
  • Looking ahead, we believe that yesterday’s CPI data cements an unchanged 7-2 vote at today’s BoE decision, with rates set to be left unchanged.
  • Yesterday’s services CPI reading will present the major point of worry for the MPC, after it topped BoE and wider sell-side expectations.
  • We don’t think the data will provide a meaningful change to the BoE’s guidance/ overarching view, but that outcome cannot be completely ruled out.