Two-Way Trade Sees Curve Steeper, Futures Unchanged

Gilts have been happy to look to wider markets for direction for most of the day.

• The initial show below 95.00 was relatively limited and short-lived, as a bid off session cheaps in EGBs (on German issuance matters, alongside lower crude and equity index futures) helped the space to recover.
• That move has since waned, leaving gilt futures unchanged on the day, showing around 95.20.
• Cash gilts twist steepen on the day, with yields 1bp richer to 2bp higher, only 30+-Year benchmarks are cheaper on the day.
• 2s10s are still above -50bp, within reach of August’s highs, while 5s30s eye early June steeps, moving above 40bp.
• On the local supply front, we saw a relatively weak auction for the 10-year 0.875% Jul-33 Green gilt with a tail of 1.3bp and the LAP of 72.564 below the pre-auction mid-price of 72.614. Note that this followed a relatively weak 10-year conventional gilt auction 2 weeks ago.
• The relatively weak demand details at today’s auction would have some pressure for gilts.
• Looking ahead, the remainder of today’s domestic docket is empty.
• Thursday, will see us (MNI) host a speech and Q&A session with Andrew Hauser, Executive Director for Markets at the Bank of England.