Under Pressure, Wider Against Peers

The early downtick in gilts holds, with core global FI on the defensive as bulls are unwilling to force a test of recent range lows in various benchmark yield measures.

• Futures trade as low 97.29, with initial support seen at yesterday’s base (97.08).
• The recent run higher in the contract is considered corrective at this stage.
• Yields are 3-4bp higher across the curve, with a light bear flattening bias.
• Gilts widen vs. EGBS across the curve.
• SONIA futures are 0.25-3.0 lower through the blues coming under modest pressure alongside gilts, although ranges remain tight and volumes relatively light.
• BoE-dated OIS sees similar, modest moves, with ~35bp of cuts showing through year end.
• The latest round of 3.75% Mar-27 gilt supply saw average results, with no tangible market impact to note.
• UK headline flow remains light, with yesterday evening’s Sunak-Starmer debate providing little to no fresh information.
• The Conservatives still face a huge deficit in the opinion polls.
• Final services PMI data suggested cost passthrough may not be as weak as the BoE’s May MPR forecasts.
• The local calendar is limited from here, which should leave focus on wider headline flow & spill over from U.S. data.