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Off Early Highs, But Comfortably Firmer On Day

GILTS

Gilt futures are shy of early bests, with the AHE-driven rally running out of steam alongside a pullback from best levels in Bunds.

  • The latest 5-Year gilt auction saw an extension of the recent trend of generally sub-par demand, which wouldn’t have aided bulls.
  • Futures last print +95, a little above 98.45. That leaves the contract ~30 ticks shy of the top of its ~50 tick range. Friday’s opening gap lower in the contract was closed during the early rally.
  • An extension of the early rally would leave bulls looking to the Dec 6 high (98.97).
  • Gilts yields run 7.5-9.5bp lower on the day, with the wings still lagging.
  • 10-Year yields found a base around 3.95% before retracing to ~3.97%. Last week’s low at 3.941% (98.84 in futures today) and 3.90% (99.22 in futures today) present the immediate reference points on that front.
  • SONIA futures last +0.5 to +12.0.
  • BoE-dated OIS is little changed to 11bp softer through ’24 MPC contracts. ~23.5bp of cuts are now priced through the June ’24 MPC. ~85bp of cuts are seen through ’24 on the whole.
  • STIRs are off dovish session extremes given the limited pullback in gilts.
  • There isn’t much in the way of local event risk to flag for the remainder of today, with broader macro focus set to fall on U.S. CPI data.
  • Tomorrow’s monthly economic activity data presents the next domestic point of note but that shouldn’t be a gamechanger for Thursday’s BoE decision.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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