Opening Gap Higher Fades

Gilt futures gap higher at the re-open, with an eye on the weakness in Chinese equities and a downtick in crude oil futures, before pulling back to last trade at virtually unchanged levels, as participants remain attuned to this week’s domestic calendar. Cash Gilts are 0.5-1bp richer across the curve.

• Local weekend news flow was dominated by an FT sources piece noting that UK Chancellor Hunt “has ruled out giving any direct fiscal support to households struggling with soaring mortgage costs, even though the issue could hit Conservative prospects in the run-up to the next general election.”
• Medium-term Gilt sales from the BoE dominate the very limited domestic docket today, with the latest UK inflation readings (Wednesday) providing the most notable UK data release of the week, ahead of Thursday’s BoE monetary policy decision.
• Re: the BoE, the dated-OIS strip currently shows a terminal rate of just below 5.90%, consolidating last week’s move higher, albeit operating a few bp shy of the hawkish extremes seen in the last few days. SONIA futures run little changed to 2.5bp softer through the reds.