Weakness In Futures Halts Just Above Support, Before Move Away From Cheaps

Global core FI weakness allows gilt futures to gap comfortably below 92.00 at the open.

• The contract found a base at 91.50, before recovering to the 91.65 area, last -55 or so, aided by a recovery from session cheaps in wider core global FI.
• Technically, conditions for futures remain bearish and yesterday’s move lower reinforces this. Today’s gap lower also strengthens the case for bears. The contract has recently breached 93.36, the Sep 6 low and a key support. Furthermore, 92.71, 76.4% of Aug 17 - Sep 20 bull run, has been breached. Sights are on 91.47, the Aug 17 low, and the next key support. On the upside, initial firm resistance is at 94.43, the 20-day EMA.
• Cash gilts sit 1bp richer to 2bp cheaper, as the curve twist steepens.
• 2s10s challenge yesterday’s multi-month highs, while 5s30s sit just shy of yesterday’s steeps.
• Comments from BoE Governor Bailey weren’t impactful for markets, as he covered what he believes to be the consequences of Brexit and outlined his support for the existing 2% inflation target.
• SONIA futures sit unch. to -8bp through the reds, as the strip steepens and contracts tick away from session lows alongside gilts.
• Meanwhile, BoE-dated OIS sees some light twist steepening.
• Final services and composite PMI headline the domestic data docket today.
• Elsewhere, GBP4.25bn of 3.50% Oct-25 gilt supply will come to market.