Tight Ranges, Off Highs

Gilts have moved away from session highs, with an uptick in European equity benchmarks providing some modest pressure.

• Futures close this morning’s gap higher but stick to a narrow 28-tick range, last +3 at 99.88.
• Morgan Stanley are the latest to flag a bearish threat for the upcoming quarterly futures roll (based on long positioning), which could pose a threat to the bullish technical backdrop.
• Initial resistance remains at last week’s high (100.80), with initial support at the 20-day EMA (99.48).
• Cash gilt yields are little changed across the curve.
• 2s10s ~9bp off the August 8 YtD high,
• 5s30s ~15bp off the August 5 multi-month high.
• This afternoon’s medium-term gilt APF sale presents the only point of note on the UK calendar today.
• Looking forwards, Thursday’s flash PMIs will be eyed for confirmation whether the stabilisation of sentiment in July was largely driven by perceptions surrounding political stability post-election or a turning point for broader sentiment.
• Further strength in the hiring and new orders sub-metrics could limit the pricing for BoE cuts during the remainder of ’24.
• For reference, BoE-dated OIS shows ~6.5bp of cuts for Sep and ~40bp of easing through year end.