Softer To Start Before Stabilising In Recent Trade

Gilt futures initially moved back below 100.00 early this week, with participants already eying swelling IG supply in both USD & EUR markets.

• Futures traded as low as 99.76, following through on late Friday pressure, before recovering to show above 100.00, as core global FI finds a bit of a base in recent trade.
• Technically, last week’s move lower resulted in a break of the 20-day EMA, suggesting scope for a bearish continuation near-term. Note that the contract has also traded through 100.36, the lower band of a MA envelope. This has exposed 98.97, the Dec 6 high, with last Friday’s low (99.60) providing some intermediate support. On the upside, initial firm resistance to watch is at 101.98, the Jan 3 high. A break would ease bearish pressure.
• Cash gilt yields are ~1-2bp higher across the curve.
• Weakness in gilts allowed the move lower in SONIA futures to extend before a rebound from worst levels alongside the longer end, with those contracts now running 0.5-8.0 softer on the day.
• BoE-dated OIS firms in sync, now showing little changed to 3.5bp firmer through ’24 contracts. ~121bp of cuts are priced through ’24 at typing (after a brief look below ~120bp of cuts).
• GBP800mn of short maturity gilt sales are due from the BoE today.