Tracking Peers Higher

Gilts follow core global peers higher at the open, with an eye on Chinese stimulus expectations.

• Futures look through yesterday’s best levels at typing, printing as high as 97.92.
• The contract is in consolidation mode and trading just below its recent high. The latest pause appears to be a bull flag formation.
• A break of resistance at the May 10 high (98.29) would confirm the flag and highlight a resumption of the recovery that started Apr 25, opening 98.46, a Fibonacci retracement.
• On the downside, a stronger reversal lower would refocus attention on 95.36, the Apr 24 low and bear trigger.
• Cash gilt yields are ~4bp lower across the curve.
• SONIA futures operate around pre-gilt open levels, last flat to +2.5, with BoE-dated OIS still showing ~55bp of ’24 cuts and 50/50 odds of a 25bp cut at the June MPC.
• Former Fed Chair Bernanke will testify in front of the TSC later today, in light of his review of Bank of England forecasting methods. That shouldn’t be a market mover.
• Elsewhere, the DMO will return to market with GBP3.0bln of the 0.875% Jul-33 green gilt.
• There is little else of note on the UK calendar, which should leave focus pinned on the U.S. CPI release.