Off Highs, Soft Pricing At Latest Green Gilt Auction

Slightly disappointing pricing metrics at the latest Jul-33 green gilt auction helps the space away from session highs, although gilts were already off best levels.

• That leaves futures +44 at 98.05.
• Highs of 98.19 were seen ahead of the auction results, with bulls eying initial resistance at 98.29.
• Cash gilt yields are 4.5-5.5bp lower across the curve, with a modest flattening bias.
• Early May yield lows were not tested through 10s, while month-to-date lows in super-long yields held.
• Increased China stimulus hope and catch up to U.S. Tsys factored into the early rally.
• SONIA futures are off best levels alongside gilts, last printing flat to +4.0.
• BoE-dated OIS sticks to recent ranges, showing near 50/50 odds of a June rate cut and ~56.5bp of easing through year end.
• A reminder that former Fed Chair Bernanke will testify in front of the TSC later today. This comes in the wake of his review of the BoE’s forecasting methods.
• This will be worth watching but we don’t think the comments will be immediately market moving as any recommendations from the report are likely to take some time to implement.
• That should leave most of the focus on the U.S. CPI release.