PMI Limits Pullback

Slightly softer-than-expected final UK services PMI data limits any pullback in gilts.

• Still, the breakdown of the services PMI release would not have provided the BoE with much comfort, with the survey collator noting that “higher salary payments and rising shipping costs contributed to the strongest rate of input price inflation across the service sector since September 2023.”
• This was a similar message to what was seen in the flash release.
• Futures +48 at 98.51 (98.33-61 range).
• Bulls need to force a move above 99.00 to turn the technical picture more in their favour after a breach of initial resistance.
• Cash gilt yields are flat to ~3.5bp lower on the day, curve bull flattens.
• 10s haven’t tested 4.00%.
• 2s10s trades through the lows of recent sessions, while 5s30s moves back towards the Feb low.
• The impending GBP3.75bn 3.75% Mar-27 gilt auction is the next factor to digest.
• SONIA futures are -0.5 to +4.5 through the blues, flattening.
• BoE-dated OIS shows 59bp of ’24 cuts.