Opening Show Lower Fades

Gilts initially follow global core FI markets lower at the open, with futures gapping down and breaching yesterday’s base in the process, before bouncing to last trade -5 or so, a little below late Thursday levels.

• Technically, the bearish impulse has extended, with the any sustained move through early lows opening the way to 93.45, a Fibonacci retracement. Conversely, initial firm resistance is at 95.46, the 20-day EMA.
• Cash Gilts are little changed to 1bp richer across the curve, with the major curves operating a little shy of yesterday’s multi-week highs (akin to U.S. Tsys).
• SONIA futures are flat to -3.5 through the blues, while the BoE-dated OIS strip trades little changed to a touch firmer, steepening at the margin. That leaves ~23bp of tightening showing for next month’s MPC, while terminal policy rate pricing sits a little above 5.80% (assuming full pass through of yesterday’s hike into SONIA).
• An address from BoE chief economist Pill rounds off this week’s local docket.
• Late Thursday comments from BoE Governor Bailey, in a BBG interview, saw him stress that it is too soon to declare victory in the battle against inflation and that the “last mile” will require a prolonged period of restrictive interest rates.