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GILTS: Softer Start As Global Supply & Equity Bid Weighs

GILTS
CEEMEABulletUKMarketsFixed Income Bullets

Supply-related pressure and a bid in European equities weighs on core global FI markets, biasing gilts lower at the open.

  • Futures pierce yesterday’s base, printing as low as 92.83.
  • First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
  • Yields 1-2bp higher across the curve.
  • 10-Year spread to Bunds 1bp tighter at ~207bp, sticking within the multi-week 203.8-213.3bp closing range.
  • Local media outlets dominated by the latest fiscal warnings, with the NIESR noting that the UK’s fiscal headroom will have been fully eroded when the new OBR forecasts are released next month. This increases the risk of further tax hikes and spending cuts, although isn’t a new line of thought.
  • Hawkish drift in GBP STIRs as gilts soften. BoE-dated OIS showing 58bp of cuts through December vs. ~60bp early today. SONIA futures flat to -2.5.
  • Looking forwards, comments from BoE MPC member Greene are due later today (15:00 GMT).
  • On the supply front the DMO will come to market with GBP1bln of 0.625% Mar-45 I/L supply.
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Supply-related pressure and a bid in European equities weighs on core global FI markets, biasing gilts lower at the open.

  • Futures pierce yesterday’s base, printing as low as 92.83.
  • First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
  • Yields 1-2bp higher across the curve.
  • 10-Year spread to Bunds 1bp tighter at ~207bp, sticking within the multi-week 203.8-213.3bp closing range.
  • Local media outlets dominated by the latest fiscal warnings, with the NIESR noting that the UK’s fiscal headroom will have been fully eroded when the new OBR forecasts are released next month. This increases the risk of further tax hikes and spending cuts, although isn’t a new line of thought.
  • Hawkish drift in GBP STIRs as gilts soften. BoE-dated OIS showing 58bp of cuts through December vs. ~60bp early today. SONIA futures flat to -2.5.
  • Looking forwards, comments from BoE MPC member Greene are due later today (15:00 GMT).
  • On the supply front the DMO will come to market with GBP1bln of 0.625% Mar-45 I/L supply.