Off Early Lows But Still Cheaper On The Day, Offshore Matters Dominate Thus Far

Gilts have worked away from opening lows, although have got nowhere near filling the gap lower, last showing 20 ticks or so shy of the top of the ~40 tick range near 98.45, down 30 to 35 ticks on the day.

• Cash gilt yields are 3.5-4.5bp higher on the day, with a light steepening bias seen.
• Yesterday’s yield lows/highs in futures present the obvious targets if rallies develop further.
• Note that 30- & 50-Year yields managed to close below their respective 200-DMAs for the first time since late '21/early ’22 on Wednesday.
• Offshore matters have been in the driving seat thus far, with JGB weakness (on BoJ communication/speculation and a poorly received round of long end supply) at least partially countered by the impulses drawn from a softer-than-expected round of German industrial production data.
• Local headline flow (BCC report, Halifax house prices) hasn’t been market moving, given its lower tier nature.
• SONIA futures sit flat to 4bp softer through the reds, while BoE-dated OIS contracts are little changed to 3bp firmer through 24 MPCs. The space has moved off hawkish session extremes as gilts tick away from worst levels.