Off Best Levels

Gilt futures only managed a shallow showing above the previously identified resistance at the 20-day EMA, before retracing from best levels alongside Bunds.

• The contract last shows +28, just off lows after bears closed the opening gap higher (contract printed at 98.08 at yesterday’s close).
• Cash gilt yields are flat to 1.5bp lower on the day, with the belly outperforming.
• SONIA futures are flat to 3.0bp firmer through the blues, pulling back from best levels alongside gilts.
• ~76bp of cuts are now priced through the December ’24 MPC on the BoE-dated OIS strip (5-6bp off dovish session extremes).
• The pressure probably comes from a combination of the idea that Q4 UK GDP data doesn’t meaningfully alter the monetary policy narrative, continued focus on a Labour-led government (and the linkages to looser fiscal policy) and some modest cross-market feedthrough from some of the less dovish elements of ECB President Lagarde’s latest address.