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Macro Inputs & Swap Flows Help Space To Recover

GILTS

Gilt futures operate a little off their late morning highs, last +30 or so, while wider cash trade sees 3-5bp of richeneing as the long end lags the broader rally, facilitating some light bull steepening of the curve. Broader macro drivers flagged earlier (namely Chinese economic worry in light of softer than expected Y/Y GDP metrics for Q2 and a related move lower in crude oil) remain in the driving seat after allowing Gilts to unwind an early round of cheapening, with little in the way of overt counter to note at the minute.

  • Swap flows also appear supportive, with swap spreads narrowing across the curve.
  • SONIA futures run 0.25bp cheaper to 5.5bp richer through the greens, twist flattening.
  • BoE-dated OIS contracts extend the early pull in, which will be aiding the aforementioned swap spread tightening and outright Gilt rally, with the liquid contracts sitting 1-10bp lower on the day as the strip flattens.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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