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SONIA strip takes over 25bp out of terminal pricing; 30y yields off highs

GILTS
  • The SONIA curve remains some way off of the lows seen yesterday with the Dec-22 contract 22 ticks above the low of 94.63 and Sep-23 contract 27 ticks above yesterday's low of 93.645. Terminal rates of above 6% are still being priced, but we seem to have stabilized somewhat at current levels.
  • Gilts on the other hand have seen new cycle highs in yields across the curve this morning, with particular focus on the 10s30s curve which hit its steepest level since 1998 as 30-year yields moved over 5%.
  • The announcement that the 30-year green gilt syndication would go ahead today has been one of the drivers today but 30-year yields are now around 9.5bp off their intraday highs.
  • The orderbook for the syndication is substantially lower than at launch last year, but probably still high enough to give the market some comfort. We will hear over the next few minutes the size of the transaction - with any size over GBP5bln likely to help subdue some of the panic in the market.
  • There is also focus on a story that at least three LDI pension schemes have requested emergency capital to remain in their positions - which has also weighed on the long-end this morning.
  • 2y yields down -7.7bp today at 4.524%, 5y yields down -3.0bp at 4.654%, 10y yields up 2.6bp at 4.528% and 30y yields up 8.5bp at 5.066%.
  • 2s10s up 10.3bp today at +0.4bp and 10s30s up 5.9bp at 53.8bp.
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