Wider Again

Gilt futures recover from session lows after the open saw weakness and a break below yesterday’s worst levels. A broader bid in core global FI has helped, although gilts continue to widen vs. core global peers (akin to yesterday, with the start of that move lacking an overt fundamental headline driver. Some pointed to elements of the BoE DMP, released a little after the widening move started. Dovish ECB repricing was noted).

• Continued dovish ECB repricing aids the widening theme today.
• The contract last shows -10 or so at 96.60, 35 ticks off lows.
• Initial support is seen at the Nov 30 low (96.10), which protects key support (92.25). A bullish technical theme remains in play as long as the contract holds above the latter.
• Cash gilt yields show 1bp lower to 1bp higher, as the curve twist steepens.
• As we have flagged elsewhere, gilts were soft into yesterday’s close, with a lack of month-end related support (some projections had a mild contraction for the related indices).
• We also saw typically hawkish comments from BoE dissenter Greene a couple of hours before the close, but that had little in the way of meaningful immediate impact.
• SONIA futures are flat to +4.0 through the blues, leaning on a bid in EURIBOR.
• BoE-dated OIS is flat to ~3.5bp softer through ’24 MPC contracts.
• Final manufacturing PMI data headlines a relatively limited domestic docket today.
• Note that the Nationwide house price index wasn’t quite as soft as expected in Y/Y terms, with an unexpected uptick seen in M/M terms.