Remain Softer On The Day, Retail Sales Weigh

Gilt futures show through early session lows, but remain well within the range witnessed earlier this week.

• The contract prints -42 at 97.52, just above worst levels of the day.
• Our technical analyst stresses that the bearish threat in the contract remains evident.
• Initial support and the bear trigger is seen at the Feb 13 low (96.81).
• Conversely, initial resistance is the 50-day EMA (98.71).
• Cash gilt yields are 3.0-3.5bp higher across the curve.’
• UK retail sales data provided the most prominent source of pressure (despite its volatile nature and perceptions re: limited feedthrough into monetary policy).
• SONIA futures are +0.5 to-5.0, operating off early session lows. The front end of the strip sees some very modest outperformance.
• BoE-dated OIS shows ~72bp of cuts through ’24, with the first 25bp step more than fully discounted through the end of the Aug ’24 gathering.
• Elsewhere, political headlines flagged at the open dominate broader UK news flow.
• Scheduled after hours comments from BoE’s Pill (19:40 London) headline the domestic docket into the weekend, although there will also be plenty of U.S. data and Fedspeak to digest.