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Steeper curves - synd weighs on long-end, front-end looks overdone yday

GILTS
  • Gilt futures are close to their closing levels yesterday (the close was 124.31) after hitting a high of 124.57 shortly after the open (which surpassed yesterday's high).
  • Bunds were also dragged higher on the gilt open, but have now returned to their prevailing levels.
  • In cash gilts, 2-year yields down 1.9bp and 5-year down 1.7bp while 10-year is down 0.8bp and 30-year down just 0.1bp.
  • This leaves a steeper 2s10s curve (1.1bp move on the day to 43.2bp) and also a steeper 10s30s (0.6bp at 24.1bp).
  • Note that the 30-year green gilt syndication is likely helping some steepening of the 10s30s as 30s trade a little softer ahead of the big supply (see our preview at 7:37BST).
  • The short-end of the gilt curve is largely being driven by changing rate hike expectations as outlined in the STIR bullet at 8:06BST. Yesterday's moves look overdone to us with rate hikes fully priced into the next three MPC meetings.
  • In terms of MPC speakers today we have Mann on creative destruction (11:00BST) and Bailey on the financial impacts of climate change (13:05BST).
  • Some other media outlets have Huw Pill speaking on a panel on CB strategy reviews with ECB's Lane, Dartmouth's Levin and Columbia University's Mosser at 14:00BST (16:00 local) at the Bank of Finland/SUERF Conference. However, the website does not show him as attending.
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