Off Highs

The early gilt rally has moderated.

• Futures last +32 at 99.87.
• The contract failed to breach 100.00 (early range 99.73-99.99), leaving Friday’s range intact.
• Cash gilt yields are 1.5-2.0bp lower across the curve.
• 10s consolidate below 4.00%, with bulls looking to close the Feb 5 opening gap higher (3.918%).
• 2s10s and 5s30s little changed within recent ranges, with Friday’s steepening off multi-month lows in 5s30s holding.
• Comments from BoE hawk Mann are due later today (17:00 London).
• GBP800mn of short-term BoE gilt sales is also due.
• Tomorrow’s labour market report is they key domestic risk event of the week.
• Ahead of that release, survey data has pointed to a continued cooling in the labour market.
• The KPMG-REC report noted that “recruitment activity across the UK continued to weaken midway through the opening quarter of the year.”
• Meanwhile, the BBG-Reed report noted that “job vacancies in England have fallen to their lowest in more than three years.”
• Wage movement will be key in the BoE’s fight against inflation.
• The KPMG-REC report noted that “the rate of salary inflation was the slowest recorded in nearly three years.”
• A continued cooling in wage pressure, if witnessed, would remove one argument for higher for longer interest rates.