Underperformance Noted In Long End

Gilts from the belly out underperform since today’s open, meaning that futures are ~50 ticks cheaper on the day, while cash Gilts run 2bp richer to 5bp cheaper, twist steepening, with a pivot around the 5-Year point observed.

• The 2-/10-Year & 5-/30-Year yield curves registered fresh multi-week & multi-month flats, respectively, in early Thursday trade.
• 2s printed fresh post-mini-Budget highs this morning before retracing. Earlier we suggested that the feedthrough from yesterday’s BoC’s hike probably shouldn’t be as pronounced for UK markets vs. some other major counterparts, given that ~100bp of further tightening is priced into the BoE-dated OIS strip i.e. we aren’t near the end of the BoE’s tightening cycle in the market’s eyes (see more on that here).
• SONIA futures see some twist steepening across the broader strip, running flat to 2.5bp richer through the greens, with cheapening seen further out.
• BoE-dated OIS remains softer on the session, with terminal rate pricing sitting just above 5.50%.
• Local (and macro) headline flow remains limited.