Lower start Alongside Peers, Local Inflation Expectations Helps Move

Gilts start the day on the defensive, with the wider pullback from Thursday’s best levels in core global bond markets and an uptick in the latest domestic Citi/YouGov inflation expectations metrics feeding in.

• Futures last show -53 at 99.97, a little off lows of the day (99.90).
• Technically, the contract has this week breached resistance at the 20-day EMA. The breach signals potential for an extension of the current corrective cycle and this has exposed resistance at 100.76, 50.0% of the Dec 27- Jan 25 bear leg. Key support and the bear trigger has been defined at 97.57, the Jan 25 low. A reversal lower and a break of this support would confirm a resumption of bearish activity.
• Cash gilt yields are 4.5-6.5bp higher on the day, with some bear flattening seen.
• SONIA futures show +0.5 to -7.5, while BoE-dated OIS shows ~109bp of cuts through ’24, essentially little changed vs. pre-gilt open levels.
• Comments from BoE chief economist Pill wrap up this week’s local docket (12:15 London), with the U.S. NFP release set to provide the headline macro risk event.