Soft Oct-53 Auction Facilitates Light Steepening Of Curve After Early Two-Way Flow

Early flow was generally guided by that seen in wider fixed income markets, with yield support levels in Bunds and typically hawkish communique from the head of the German Bundesbank helping cap the early broad bid in core global FI markets.

• A near 18-month low for the rate of inflation lodged in the BRC shop price index will have provided some domestic support at the gilt open, while comments from BoE Deputy Governor Ramsden re: a more homegrown element to inflation and a reiteration of the Bank’s higher for longer mantra probably factored in to limiting the early bid.
• Gilt futures show just above worst levels of the day, -10 or so, after printing above yesterday’s high early on.
• Cash gilts yields are flat to 2.5bp higher on the day. The presence of GBP2.75bn of 3.75% Oct-53 supply provided a modest steepening impulse during early trade. That extended post-auction, given a relatively weak round of demand metrics (more on that here).
• SONIA futures have traded either side of unchanged on the day, tracking gilts/wider bonds, last showing flat to -1.5bp.
• BoE-dated OIS contracts are little changed to 1bp softer on the day through ’24 MPC meetings.
• Comments from BoE hawk Haskel headline the domestic docket during the remainder of today’s session.