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GILTS: Off Lows, Fiscal Worry To Be Addressed By Treasury

GILTS
CEEMEABulletUKMarketsFixed Income Bullets

Gilts are comfortably off early session lows after continued fiscal worry applied fresh pressure at the open.

  • Futures based at 89.00 before a recovery to 89.90 as of typing.
  • Bearish technical theme remains intact.
  • Bulls initially need to retake yesterday’s high (91.58).
  • Yields 1.5-3.5bp higher, 10s lead the weakness. Benchmarks 9-10bp off highs.
  • 10s failed to test 5.00%, stalling well ahead of that level, peaking at 4.921%.
  • 30s topped out at 5.473%, failing to test the next round number at 5.50%.
  • UK headline flow has been relatively limited, but the Treasury’s assurances surrounding the government’s fiscal credibility hasn’t promoted much confidence amongst market participants.
  • The potential for fiscal stress is getting attention in the political sphere.
  • Speaker of the House of Commons Sir Lindsay Hoyle has confirmed that he has granted an urgent question in the Commons today to shadow chancellor Mel Stride, asking Chancellor of the Exchequer Rachel Reeves to deliver a statement on the "growing pressure of borrowing costs on the public finances."
  • Either Reeves or another Treasury minister will be required to answer in person. Urgent questions are from 10:30.
  • BoE-dated OIS back to little changed on the day after gilts recover from lows.
  • 45.5bp of cuts priced through year-end vs. ~39bp that briefly printed during this morning’s hawkish extension.
  • SONIA futures flat to -5.0.
  • BoE DMP survey data provided something for everyone, while the latest S&P-KPMG-REC report on jobs was relatively downbeat.
  • Comments from BoE’s Breeden are due this afternoon (16:00 London).
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Gilts are comfortably off early session lows after continued fiscal worry applied fresh pressure at the open.

  • Futures based at 89.00 before a recovery to 89.90 as of typing.
  • Bearish technical theme remains intact.
  • Bulls initially need to retake yesterday’s high (91.58).
  • Yields 1.5-3.5bp higher, 10s lead the weakness. Benchmarks 9-10bp off highs.
  • 10s failed to test 5.00%, stalling well ahead of that level, peaking at 4.921%.
  • 30s topped out at 5.473%, failing to test the next round number at 5.50%.
  • UK headline flow has been relatively limited, but the Treasury’s assurances surrounding the government’s fiscal credibility hasn’t promoted much confidence amongst market participants.
  • The potential for fiscal stress is getting attention in the political sphere.
  • Speaker of the House of Commons Sir Lindsay Hoyle has confirmed that he has granted an urgent question in the Commons today to shadow chancellor Mel Stride, asking Chancellor of the Exchequer Rachel Reeves to deliver a statement on the "growing pressure of borrowing costs on the public finances."
  • Either Reeves or another Treasury minister will be required to answer in person. Urgent questions are from 10:30.
  • BoE-dated OIS back to little changed on the day after gilts recover from lows.
  • 45.5bp of cuts priced through year-end vs. ~39bp that briefly printed during this morning’s hawkish extension.
  • SONIA futures flat to -5.0.
  • BoE DMP survey data provided something for everyone, while the latest S&P-KPMG-REC report on jobs was relatively downbeat.
  • Comments from BoE’s Breeden are due this afternoon (16:00 London).