Reversing Some Of Yesterday’s Rally

Gilts have seen the early pullback from yesterday’s best levels extend further.

• Futures print as low 97.65 on the move, before recovering a little to trade -23 at 97.78.
• Technically, yesterday’s strong rally in futures resulted in a break of resistance at 97.86 and 98.05, although that has since been countered. This breach cancelled a recent bearish threat and instead highlights a resumption of the bull cycle that started May 29. A continuation higher would signal scope for a climb towards 98.89, the May 16 high and a key resistance. Initial support lies at 97.12, the 20-day EMA.
• Cash gilt yields are 3-4bp higher across the curve, with light bear flattening seen.
• This has allowed 2s to pull further away from yesterday’s multi-week yield lows.
• SONIA futures and BoE-dated OIS operate around pre-gilt open levels.
• The former shows -0.25 to -4.0 through the blues, while the latter shows ~38bp of ’24 cuts vs. ~41bp late yesterday.
• Domestic focus now falls on the impending release of the Labour Party election manifesto (with the event due to start around 11:00 London), as the Party still holds a commanding lead in the opinion polls.
• Tomorrow’s Bank of England/Ipsos Inflation Attitudes Survey provides the next domestic data point of note.