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Sharp Bear Steepening

GILT SUMMARY

Gilts started off the session on a relatively quiet note, before selling off sharply from late morning.

  • The curve has bear steepened with the long-end under performing the EGB space. While yesterday's announcement from the BoE on expanding QE is positive for gilts, a potential slowdown in the pace of purchases coupled with the furlough scheme extension unveiled by Rishi Sunak, are offsetting dynamics
  • Cash yields are now 2-8bp higher on the day with the 2s30s spread 4bp wider. Last yields: 2-year -0.0356%, 5-year -0.0321%, 10-year 0.2756%, 30-year 0.86%.
  • The Dec-20 gilt future trades at 135.50, towards the bottom end of the day's range (L: 135.38 / H: 136.24)
  • The short sterling futures strip has steepened with greens/blues down 1.0-3.5 ticks.
  • Looking ahead, there is a packed data calendar next week. Jobless claims data for October and earnings/employment data for September will be published on Tuesday, preliminary Q3 GDP is out on Thursday alongside the September prints for industrial production, construction output, the index of services and international trade data.
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