Retail Sales Weigh, Although Move Off Extremes

The combination of domestic retail sales data and Fedspeak flagged elsewhere pressured gilts early today.

• Futures move through yesterday’s low to show as soft as 97.56, before recovering to ~97.75.
• The volatile nature and details of the retail sales print likely limit follow through, along with perceptions re: limited impact on BoE policy.
• Our technical analyst stresses that the bearish threat in gilt futures 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 ~1.5bp higher across the curve.
• STIR markets move a little further away from early extremes.
• SONIA futures +0.25 to -3.5, while BoE-dated OIS shows ~73bp of cuts through ’24.
• Labour’s double by-election win dominates local newswires.
• Elsewhere, there is widespread speculation re: Chancellor Hunt dropping plans for a 2p cut in income tax owing to the technical recession.
• Looking ahead, comments from BoE’s Pill headline the local docket into the weekend (19:40 London).