Off Yesterday's Lows

Gilts firmer alongside Bunds, with participants fading yesterday afternoon’s U.S. data-/oil-driven weakness.

• Futures +52 at 99.01.
• The technical backdrop is bullish. Initial resistance at this week’s high (99.21).
• Yields 3-4bp lower across the curve, light flattening bias.
• The DMO’s quarterly issuance calendar did not provide any real shocks.
• The most meaningful surprise probably came via the announcement of a consultation to gather views on continuing demand for a short conventional gilt tender (for a maturity of under three years) in the coming period.
• SONIA futures flat to +4.0.
• BoE-dated OIS remains sticky, showing ~41bp of cuts through year end.
• Economic resilience and a lack of commitment to follow up cuts from the BoE has allowed SONIA markets to decouple from SOFR & EUR peers in recent weeks.
• Wider macro matters are set to dominate into the weekend, with little of note on the UK calendar.
• Further out, final PMIs, the BoE DMP survey and comments from BoE’s Breeden headline next week’s UK agenda (note Breeden will speak on supervisory matters, not monetary policy).