Short End Leads Recovery, Curve Twist Steepens

Gilts have squeezed away from session cheaps, although we haven’t seen much in the way of overt headline drivers, leaving receiver-side flows in the BoE-dated OIS space as a potential/likely culprit (terminal policy rate pricing eases to ~6.40% at typing), with the major cash Gilt benchmarks running 6.5bp richer to 1bp cheaper changed as the curve twist steepens. Gilt futures are +10, failing to challenge Friday’s extremes thus far. Meanwhile, SONIA futures run 0.5-10bp richer through the blues, with the back end of the whites/reds outperforming on the strip. Major swap spreads are mixed on the day. Focus remains on BoE Governor Bailey’s latest address, which will cross later.