Off CPI-Induced Lows

Gilt futures have started to pare losses, aided by feedthrough from the hold of technical support levels in both TY & Bund futures, with a downtick in crude oil prices also aiding the stabilisation.

• A reminder that the firmer-than-expected domestic CPI data provided the early cheapening impetus, although the readings were softer than BoE projections in the most recent MPR.
• That leaves gilt futures -60 or so around 99.30. The contract is still ~40 ticks away from closing the opening gap lower and sits a handful of ticks shy of the peak of its 56-tick session range.
• Cash gilt yields are 5-11bp higher on the day, bear flattening. 2s10s and 5s30s tick away from YtD highs in the process, while most outright benchmark yields have registered fresh YtD highs.
• SONIA futures are flat to 14.5bp lower, stabilising away from lows alongside gilts.
• BoE-dated OIS prices ~117bp of cuts through ’24 (vs. ~130bp at yesterday’s close), also unwinding from extremes seen post-CPI as gilts stabilise.
• Outside of the previously flagged political news and CPI readings, UK house price data saw the most pronounced Y/Y fall since ’11 in November.
• GBP3.75bn of 4.625% Jan-34 gilt supply is due in just under an hour.