Recovery Runs Out Of Steam, Steepening Still Evident

The turn away from recovery highs in gilts has seen fresh session lows set in futures.

• Although we have broken through Friday’s low, Thursday’s base remains ~40 ticks away, presenting initial protection ahead of support at 93.36, the low from last Wednesday.
• Cash gilts hold steeper on the session, running 4.5-7.0bp cheaper across the curve.
• Recent comments from UK Chancellor Hunt pointed to a lack of fiscal room re: the Autumn statement, while he also pointed to the announcement of further pro-growth measures in the months ahead. He also warned of a stickier inflation outlook and the need to boost growth to avoid tax rises.
• £IG issuance continues to tick over in early September, although this morning’s confirmation of long-dated gilt issuance later this month would have been of more interest for markets.
• SONIA futures sit 0.5-6.5bp lower on the day with the reds leading the move, while BoE-dated OIS is a little shy of session highs, flat to ~6bp firmer as the strip steepens.