Stabilising After Bearish Pressure Seen In Wake Of Auction

A relatively wide tail in the latest 10-Year gilt auction weighs on the space.

• Futures touched fresh session lows in the wake of the auction, building on the pre-auction concession, before stabilising.
• The contract last prints -25 at 95.53 (95.44-74 range).
• Initial support at the 25 April low (95.36) is nearing.
• A breach there would expose round number support (95.00).
• Cash gilt yields are 2.5-3.5bp higher across the curve, bear flattening.
• 2s printed the highest yield level seen since the late Feb benchmark roll.
• 10+-Year benchmark yields are all a touch below their respective April highs, while 5s had a look through their April peak.
• Spill over weakness from U.S. Tsys was seen at the open.
• GBP STIRs are off hawkish session extremes, ’26 SONIA futures probe cycle lows.
• BoE-dated OIS shows ~38bp of ’24 cuts, with a little over 90% odds of a 25bp cut priced through the end of the Sep MPC.
• Final UK manufacturing PMI data was marked higher but remained below the breakeven 50.0 level.
• Nationwide house price data was softer than expected but isn’t a meaningful market mover.
• Focus now moves to the U.S. data releases and FOMC decision.