Off Session Cheaps, Curve Twist Flattens

Gilt futures have recovered from session lows after failing to force a meaningful break of yesterday’s London afternoon/evening lows during a broader round of core global FI weakness. That leaves the contract -10 or so on the day, while wider cash Gilts run 1.5bp cheaper to 2.5bp richer as the curve twist flattens, pivoting at the 5-Year point.

• Local headline flow has been limited thus far, leaving wider, flow-driven moves in core global FI markets to lead the space.
• SONIA futures are flat to -2.5 through the blues, while BoE-dated OIS is little changed to a touch firmer on the day, leaving 50/50 odds of a 50bp hike priced for next month’s meeting, while terminal BoE pricing sits around 5.90% in policy rate terms.
• While the local data docket is non-existent, the UK will see three by-elections conducted today, with well-documented headwinds for the ruling Conservative Party noted.