Off Lows But Rally Capped

Gilt futures have settled into the range established during the first 2-3 hours of Wednesday trade, with spill over surrounding the firmer-than expected U.S. PMI data helping limit recovery rallies in wider core global FI markets.

• That leaves the contract -10 at 98.29, around the middle of their 96-tick session range.
• The contract breached initial support, trading as low as 97.81, before recovering from worst levels.
• Cash gilt yields are 0.5-1.5bp higher across the curve, with 10s showing back below 4.00% after their first ’24 foray above that mark.
• Key support in futures/yield resistance were not tested on the move.
• 2-Year yields now sit a touch narrower on the day vs. U.S. peers, although remain wider vs. the rest of their 2-Year core equivalents and indeed vs. all peers further out the curve, with the impact of today’s domestic PMI data still being felt across those channels.
• Tepid bidding metrics at the latest gilt auction (in the belly of the curve) did little to promote wider demand in the space.
• SONIA futures sit flat to 4.0bp lower through the blues, recovering from worst levels alongside gilts.
• BoE-dated OIS shows ~98bp of cuts through '24, also retracing from extremes alongside gilts.