Lower As OATs Struggle Ahead Of Elections, Month-end Flow & U.S. PCE Eyed

Gilt futures are lower alongside EGBs.

• Uncertainty surrounding the French political situation dominates ahead of Sunday’s first round of lower house elections, applying some modest spill over pressure to gilts.
• Futures last -21 at 97.79, just off session lows of 97.75.
• Yesterday’s low (97.63) presents initial support, while Wednesday’s high (98.54) presents initial resistance.
• Cash gilt yields are 0.5-2.5bp higher, with a steepening bias on the curve.
• BoE-dated OIS shows ~14bp of cuts for the August MPC and ~42bp of cumulative easing through year end, with contracts 0.5-2.5bp firmer on the day through mid ’25 meetings.
• Focus now moves to U.S. PCE data after French, Spanish & Italian flash HICP data matched wider expectations.
• Modest revisions higher in the final Q1 GDP readings also did little for markets.
• Elsewhere, sizeable gilt month-end index duration extension flows (based on projections) could play a part as well.

Source: MNI - Market News/Bloomberg. 2025 meeting dates are estimated.