Wider Vs. Peers

Gilts are just off worst levels, with the softer-than-expected regional German CPI data allowing wider core global FI markets to stabilise.

• Still, gilts are wider vs. all global peers across the curve, given the locality of the German CPI data for EGBs and as UK paper catches up to late NY/Asia weakness in U.S. Tsys.
• Futures last -61 at 98.16 (range 96.12-43).
• Technically, round number support protects the May 1 low (95.87).
• Cash gilt yields are 3.5-4.5bp higher, with the curve a touch steeper.
• 2s breached their early May high during the early London sell off, but the break was only shallow. Yields further out the curve have failed to test their May extremes.
• SONIA futures are also off lows, last flat to -7.0 through the blues. Cycle lows in ’24 & ’25 futures have not been breached.
• Downside plays in Z4 & H5 options were seen during the early sell off in futures.
• BoE-dated OIS is roughly in line with late Tuesday levels, showing ~31.5bp of ’24 cuts and a little over even odds of a 25bp cut come the end of the Sep MPC.
• GBP1bn of 0.125% Mar-39 I/L supply passed smoothly, albeit with a slightly lower cover ratio than the prior offering.
• UK-centric discussions continue to focus on political matters.
• The UK calendar is empty for the remainder of the day, which will leave focus on broader headline flow and national level German inflation data.