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Talk of a U-turn keeps gilts bid

BONDS
  • Volatility continues in gilt markets with 10-year gilts yields down more than 20bp at writing. The biggest moves have been seen at the 5-year part of the curve with 2-year yields having moved a bit less. These moves follow building expectations of a U-turn on the tax cuts included in the "Growth Plan" and also come amid chatter of how long the PM and Chancellor will remain in their posts.
  • Bunds moved higher in sympathy with gilts but Treasuries have been less affected - staying closer to their close of yesterday.
  • Looking ahead we will have US retail sales, import / export prices, inventory data and the first print of the Michigan survey. The inflation expectations component in the latter will be particularly watched.
  • The Bank of England will also conduce the last of its temporary purchase ops today with linkers at 14:45BST / 9:45ET and long conventionals at 15:45BST / 10:45ET. The size of those operations are set at GBP5bln each, but may be revised up to 11:00BST / 6:00ET by the BOE.
  • TY1 futures are up 0-6+ today at 111-07 with 10y UST yields down -2.3bp at 3.923% and 2y yields down -2.9bp at 4.436%.
  • Bund futures are up 1.55 today at 137.77 with 10y Bund yields down -8.6bp at 2.195% and Schatz yields down -7.2bp at 1.832%.
  • Gilt futures are up 2.57 today at 970.09 with 10y yields down -19.9bp at 3.993% and 2y yields down -9.8bp at 3.647%.
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