Off Best Levels, 10s Hover Around 4.00%

The broader rally in core global fixed income markets has allowed the early rally in gilts to extend, although the space has pulled back from best levels alongside global peers.

• Futures sit a little shy of best levels, +66 at 99.10 (range 98.64-99.37).
• Initial resistance at 99.32 was pierced, but bulls couldn’t sustain the break. The next meaningful resistance levels lie above 100.00, with a break of 100.37 needed to negate the current bearish technical threat.
• Yields are 3.5-5.0bp lower across the curve. 10s just above 4.00% after showing as low as 3.98%.
• This morning’s DMP survey and final services PMI data factored into the early stages of the rally. We noted at the time that we don’t think that the data increase the odds of a May cut and we continue to focus on the June & August meetings as the most likely start of the easing cycle.
• Markets continue to agree, with us. ~18.5bp of cuts are priced through June, with ~34bp of cuts priced through the August meeting. Beyond there, ~73bp of cuts are priced by year end.