Weakness In Bunds & Impending Supply Weighs

Gilts are biased lower by the move in Bunds, leaving the major cash benchmarks in the former running 3-4bp cheaper early on, as the curve steepens at the margin and 10-Year yields edge closer to the 4.50% mark. Gilt futures have breached recent session lows to last trade -40 or so. That leaves bears looking to the 20 June low & bear trigger (93.88) as next meaningful support level.

• The impending round of Gilt supply will also be weighing on the space, adding to the pressure derived from Bunds.
• The SONIA strip sees some twist steepening pressure, while terminal pricing on the BoE-dated OIS strip nears 6.35% in policy rate terms.
• Local headline flow has seen some focus on funding gaps for local authorities, although that isn’t a particularly new/actionable story. Elsewhere, we saw some positive musings from Sainsbury’s re: relief surrounding food price inflation.