On The Defensive

Gilts continue to fade from BoE-inspired highs.

• Futures now comfortably below pre-decision levels, +16 at 99.22.
• Cash gilt yields unchanged to 6.5bp lower vs. yesterday’s close, curve still bull steepening on the day.
• BoE-dated OIS back to little changed vs. pre-BoE levels, showing just over 75bp of ’24 cuts.
• SONIA futures +0.5 to +7.5.
• A few factors driving the latest pullback:
• The BoE Agents’ Survey suggesting that the costs and prices story is unchanged, with no big change in tone on wage growth.
• Jobless claims data out of the U.S. and comments/movement re: inflation in the latest U.S. S&P Global PMI release.
• We still see today’s decision as move towards a BoE cut, see our earlier bullet titled “more dissenters in May; June in play; August most likely for cut.”
• A reminder that BoE Governor Bailey noted that "we're not yet at the point where we can cut interest rates" although he accepted we are moving in the right direction.