Remain Underpinned

Gilt futures +51 at 98.54 (98.33-61 range) Initial resistance breached, bulls now need to break 99.00.

• Cash gilt yields are 1bp higher to 3bp lower as the curve twist flattens.
• Some pre-auction concession provided decent demand at the GBP3.75bn 3.75% Mar-27 Gilt offering.
• That, coupled with the softer-than-flash final services PMI reading, has helped gilt futures back towards early session highs.
• Still, PMI details re: wages and selling prices would not have comforted the BoE.
• Those matters, coupled with the seemingly impending fiscal easing (latest reports revert back to idea of 2ppt NI cut), help promote the idea of higher for longer interest rates in the background.
• Lower tier domestic retail activity surveys disappointed overnight but weren’t seen as a meaningful driver for gilts.
• SONIA futures are -0.5 to +4.5 through the blues.
• BoE-dated OIS shows ~59bp of cuts.
• The UK calendar is essentially empty for the remainder of Tuesday.
• Expect our full preview of tomorrow’s Budget to cross in the next few hours.