Pressured By Weakness In Bunds

Gilts follow Bunds lower after the first round of the French legislative elections.

• Futures print 97.23, the lowest level seen since June 12.
• Bears breach support at the trendline drawn from the May 29 low & the Jun 28 low (97.60/54).
• This increases the bearish threat, with now bears eying the June 12 low (96.84) on any extension lower.
• Cash gilt yields are 3-4bp higher across the curve, comfortably within multi-month ranges.
• GBP STIRs sit around levels flagged ahead of the gilt open.
• Final manufacturing PMI headlines the domestic calendar today, with lending and money supply data also due.
• GBP650mn of long-dated BoE APF gilt sales are due this afternoon.
• Looking further ahead, Wednesday will see the final services PMI reading, while Thursday will bring the release of the BoE’s latest DMP survey.
• The general election will be held on Thursday and we should have a good indication of the outcome early on Friday morning. Given the picture provided by opinion polls, focus is set to fall on the scale of the likely Labour majority.
• Expect our political risk team’s full preview of that event in the coming days.