Stabilising Alongside Tsys, Strong Demand At Latest Short End Auction

The overnight stabilisation in U.S. Tsys provided some support at the open, although bulls couldn’t retake 97.00 in gilt futures.

• Further support may have come from BRC shop price index data, which showed the shallowest Y/Y rise since late ’21, +0.2%.
• Futures last +15 at 96.82 vs. highs of 96.93.
• Gilt yields are ~2bp lower across the curve.
• This comes after yesterday’s steepening saw 2s10s close above 0bp for the first time since May ’23. The April 5 ’23 high (11.4bp) is the next target on that curve.
• This week’s cheapening of the belly on the 2-/3-/5-Year fly helped generate strong demand at the GBP4bn 3.75% Mar-27 gilt auction.
• Little net movement in GBP STIRs today.
• SONIA futures are flat to +3.0.
• BoE-dated OIS is little changed to 1.5bp more dovish, showing ~13.5bp of cuts for the August MPC and ~42bp of easing through year end.
• There is little of note on the UK calendar for the remainder today, which will likely leave cross-market moves and election matters at the centre of discussions.