Off Early Lows As Equities Struggle, Supply Passes Smoothly

Gilts have recovered from early session lows.

• Weakness in equity markets provides some support after the firmer-than-expected UK CPI data weighed.
• This morning’s 5-year supply passed smoothly enough, with the cover ratio topping 3.00x, although price metrics were on the softer side.
• Gilt futures +11 at 98.63, back from yesterday’s late highs.
• The bullish technical theme remains in play, with a noisy CPI release doing little to alter that picture.
• Initial resistance at yesterday’s high (98.79), which protects the June 25 high (98.92).
• Initial support not seen until the July 11 low (97.63).
• Cash gilt yields 0.5-2.5bp higher, curve bear flattens.
• SONIA futures also off lows -2.0 to +1.0.
• BoE-dated OIS shows ~8.5bp of cuts for Aug vs. ~10bp late yesterday, 47bp of easing though year-end vs. ~49bp late yesterday.
• A reminder that the King’s Speech will be delivered late this morning, with labour market data due tomorrow.