Rally Extends As Oil Hit Fresh Lows for The Week

The previously covered weakness in crude oil futures has extended, with both Brent and WTI registering fresh lows for the week.

• This has promoted a bid in core global FI markets as benchmark traded inflation measures soften, allowing the modest London morning rally in Bunds and gilts to extend further.
• Still, both of those benchmark futures contracts remain shy of this week’s highs and initial resistance areas (135.17-18 for Bunds & 100.80 for gilts).
• German yields are 4-5bp lower across the curve.
• Bunds marginally outperform gilts and EGB peers at the 10-Year point.
• Gilt yields are little changed to 5bp lower, as the curve flattens.
• Dovish moves in STIRs also seen alongside the rally in bonds.
• Euribor futures are 1.0-5.0bp higher, trading at/just off fresh session highs, while ECB-dated OIS shows ~66bp of cuts through year end.
• SONIA futures are -0.5 to +3.5, generally just off session highs, with BoE-dated OIS showing ~42bp of ’24 cuts.