Pushing Higher Alongside European Counterparts

A soft start for the European flash PMI readings provides a fresh bid for gilt futures, which were already moving in that direction anyway.

• The contract retakes 96.00 and moves comfortably beyond the level, last +45.
• Yesterday’s knee-jerk BoE high comes into view, but more meaningful technical resistance is seen at the Sep 20 high (96.71). The trend structure in the contract remains bullish.
• Cash gilts run 6-7.5bp richer, with the wings leading.
• Local data saw retail sales for August provide a modest downside miss.
• SONIA futures show 2-5bp firmer.
• Terminal policy rate pricing in BoE-dated OIS shows a little above 5.40%, with liquid contracts 2.5-6.0bp softer early on.
• A quick reminder that BoE Governor Bailey did the post-MPC rounds yesterday. The early hours of Thursday evening saw Bailey point to expectations re: another notable drop in October’s CPI data (due in Nov), while he also underscored the need to stay the course in the fight against inflation. Bailey also chose to refrain from giving an opinion on the next move in interest rates.
• Flash PMIs headline the domestic docket today.
• The relatively small size of next week’s 1.125% Oct-73 Gilt tap (GBP750mn) will probably be lending some background support.