Off Best Levels But Still Firmer On The Day

Gilts have continued to drift away from early session highs, with impulses from the firmer than expected UK & Eurozone PMIs, as well as weak pricing at the latest I/L gilt offering from the DMO, factoring in. Firmer than expected (but steady) short-term inflation expectations in the ECB consumer inflation expectations survey were also noted.

• Gilt futures last show +25 or so at 96.83, ~5 ticks off lows, sticking to a relatively contained 50-tick range thus far.
• Cash gilt yields are 2.5-4.5bp lower, with the wings still lagging.
• A quick reminder that cross-market spill over from the dovish commentary via ECB’s Schnabel provided the early London bid.
• Overnight local data (BRC sales and Citi/YouGov inflation expectations survey) had little to no tangible impact at the open, although the uptick in longer term expectations in the Citi YouGov survey may have factored into the move away from best levels.
• SONIA futures are now flat to 4.5bp firmer on the session, with the front of the reds still outperforming on the day.
• BoE-dated OIS is little changed to ~6bp softer on the day through ’24 MPC contracts. 75bp of total cuts is currently priced for ’24 on the whole.