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Under Pressure, 2s10s Tests 0bp

GILTS
Bank Of England (BOE) Market NewsHomepageBond Market NewsBulletMarketsFixed Income Bullets

Gilts have sold off alongside wider core global FI markets following the first round of the French legislative elections.

  • Futures trade as low as 97.07.
  • Support at the trendline drawn from the May 29 low & the Jun 28 low (97.60/54) have been broken.
  • Bears now eye the June 12 low (96.84).
  • Cash gilt yields are 1-6bp higher, with the curve steepening.
  • Multi-month ranges are comfortably intact across all major benchmarks.
  • BBG benchmark 2s10s printed above 0 for the first time since May ’23.
  • Modest hawkish adjustments are seen in most GBP STIRs.
  • BoE-dated OIS shows ~14bp of cuts for August and ~42bp easing through year end.
  • SONIA futures are +0.25 to -5.0
  • GBP650mn of long-dated BoE APF sales are due this afternoon.
  • The general election will be held on Thursday. We should have a good indication of the outcome early on Friday morning. Given the picture provided by opinion polls, focus is set to fall on the scale of the likely Labour majority.
  • Expect our political risk team’s full preview of that event in the coming days.

Fig. 1: Gilts 2s/10s Curve (bp)

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Gilts have sold off alongside wider core global FI markets following the first round of the French legislative elections.

  • Futures trade as low as 97.07.
  • Support at the trendline drawn from the May 29 low & the Jun 28 low (97.60/54) have been broken.
  • Bears now eye the June 12 low (96.84).
  • Cash gilt yields are 1-6bp higher, with the curve steepening.
  • Multi-month ranges are comfortably intact across all major benchmarks.
  • BBG benchmark 2s10s printed above 0 for the first time since May ’23.
  • Modest hawkish adjustments are seen in most GBP STIRs.
  • BoE-dated OIS shows ~14bp of cuts for August and ~42bp easing through year end.
  • SONIA futures are +0.25 to -5.0
  • GBP650mn of long-dated BoE APF sales are due this afternoon.
  • The general election will be held on Thursday. We should have a good indication of the outcome early on Friday morning. Given the picture provided by opinion polls, focus is set to fall on the scale of the likely Labour majority.
  • Expect our political risk team’s full preview of that event in the coming days.

Fig. 1: Gilts 2s/10s Curve (bp)

Keep reading...Show less