Off Lows, Fiscal Speculation Vs. DMO Supply Reduction

Gilts have moved away from worst levels of the day, with bulls remaining in technical control in futures and participants likely looking to the DMO gilt issuance gap surrounding the Autumn Statement and expected adjustment lower in the gilt issuance remit at that event.

• This, coupled with a move away from session lows in wider core global futures, keeps the space underpinned, despite a closure of Friday’s opening gap higher in the contract.
• The contract last sits little changed on the day just at 97.20, ~10 ticks off the peak of its 41 tick range. Well-defined technical parameters remain some way off on both sides.
• Cash gilts sit within 1bp of Friday’s closing levels across the curve, with a light twist flattening of the curve seen.
• A quick reminder that cross-market impetus and speculation surrounding the potential for some fiscal loosening for UK households seemed to factor into early price action.
• SONIA futures last show +1.0 to -2.0 through the blues.
• Liquid BoE-dated OIS contracts are -1bp to +1bp.
• The previously flagged BoE events and scheduled APF sales covering medium-term gilts provide the scheduled domestic points of note on Monday.