Macro Front & Centre, With No Meaningful Idiosyncrasies Evident

Gilts have been happy to follow the general direction of travel in wider core global FI markets since the catch-up cheapening move observed after the long weekend.

• Local headline flow has been subdued, with lower tier house price data and a mark higher (vs. flash) in the final manufacturing PMI release providing the highlights.
• Yields are 3-5bp higher across the curve, with a light steepening bias apparent.
• Gilt futures have pared around two thirds of the opening gap lower, operating just over 10 ticks back from best levels and haven’t got anywhere near closing the opening gap, last showing -39.
• BoE-dated OIS fully prices a 25bp hike come the end of next week’s meeting, while terminal SONIA pricing shows just above 4.90% (or just below 5.00% in benchmark BoE rate terms), after the latter adjusted to wider macro developments over the long weekend.
• A quick reminder that our policy team fleshed out their understanding that “analysis for the BOE’s upcoming May forecast round looks set to conclude that all the relevant metrics remain tight even if easing slightly from their peaks,” although opinions on the matter vary within the MPC.
• Looking ahead, BoE Decision Maker Panel data and the final services PMI print (both due Thursday) present the most notable events on this week’s domestic calendar.
• For an in-depth look at this week’s key UK events, along with Gilt issuance and cash flow coverage, please see our latest Gilt Week Ahead piece.