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PMI Details & Continued Supply Angst Apply Pressure

GILTS

Today’s PMI data and continued post-Autumn Statement/DMO update angst re: a higher-than-expected supply burden in the current and coming years, have combined to pressure gilts.

  • Futures took out previously identified support in the form of the Nov 15 low (95.93) before bouncing from worst levels.
  • That leaves the contract -75 or so at 95.95, ~20 ticks off the base of its 120 tick session range. Next support is seen at the 50-day EMA/Nov 13 low and key support (94.80/58).
  • Cash gilts yields now sit 6.5-11.5bp firmer on the day, with 5s under the most pressure.
  • We flagged at the time that services price inflation and labour market tightness indicated in the PMI surveys will concern the MPC, with a subsequent hawkish adjustment in UK STIRs noted (more on that to follow), filtering into gilts and resulting in front end-/belly-led weakness.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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