Off Cheaps As BoE Pricing Fails To Challenge Yesterday’s Highs

Gilts operate off session cheaps as participants remain reluctant to test yesterday’s hawkish BoE pricing extremes post-CPI.

• That leaves futures -10 or so, while cash Gilts run 1.5-2.5bp cheaper across the curve.
• Technically, a bearish theme in gilt futures remains intact and Friday’s sharp sell-off plus this week’s extension, reinforces this condition. The contract has traded through support at 93.70, the Aug 4 low and a bear trigger. The breach marks a continuation of the bear cycle that started Jul 19 and opens 92.09 next, the Jul 7 low and a key support. Key short-term resistance has been defined at 95.82, the Aug 10 high. Initial resistance is at 93.70.
• SONIA futures are -4.5 to +2.5 through the blues, twist flattening.
• Liquid BoE-dated OIS contracts sit -1bp to +2bp, twist flattening.
• Pricing covering next month’s MPC meeting shows 31bp of tightening, while terminal policy rate pricing shows just above 6.00%.