Weaker Start

Gilts follow core global FI markets away from yesterday’s highs as the impact from any month-end flow and yesterday’s U.S. data fades.

• Focus on the continued global battle against inflation remains evident.
• Gilt futures last print -45 at 97.65 (97.60-88 range), ~80 ticks off yesterday’s low.
• Cash gilt yields are 4-6bp higher on the day.
• Long end yields are shy of the fresh ’24 highs that were registered on Thursday.
• SONIA futures see a little more pressure, last flat to -5.5 through the blues.
• BoE-dated OIS moves to price ~60bp of cuts vs. ~63bp pre-gilt open.
• Fiscal speculation continues to dominate local news flow, with the latest report suggesting that Chancellor Hunt has ruled out a stamp duty cut re: the housing market, given inflationary risks.
• Discussions surrounding incoming BoE Deputy Governor Lombardelli also seen, with most pointing to hawkish risks given her previous work. We still see August as the most likely timing of the first rate cut.
• Elsewhere, Nationwide house price data was firmer than expected, with the Y/Y reading moving back into positive territory for the first time since January ’23.
• Final UK manufacturing PMI data and comments from BoE’s Pill are due on Friday.