Twist Flattening In Play, Local Inflation Expectations Mixed

The latest round of UK Citi/YouGov inflation expectations data were mixed, with the 1-Year metric ticking up to 5.0% in June (prev. 4.7%) while the 5- to 10-Year measure moderates to 3.3% (prev. 3.5%). The move in the latter may be helping insulate the longer end from the uptick in crude oil futures, although the move in the former and crude oil price dynamics seemingly help push 2-Year Gilt yields to fresh cycle highs. Broader core global FI markets are little off session cheaps and global equity futures print a little shy of their own respective highs.

• Cash Gilts run 6bp cheaper to 3bp richer, twist flattening as the 2-/10-Year spread moves back towards last week’s cycle extremes, while Gilt futures are essentially flat on the day. SONIA futures sit 0.5bp richer to -10.5 through the reds, twist flattening, while terminal policy rate pricing on the BoE-dated OIS strip continues to operate just above 6.30%.
• Local headline flow remains light, outside of the aforementioned inflation expectations headlines and a slightly firmer than flash final UK manufacturing PMI release.