Wings Lead Weakness

Gilt futures have been happy to consolidate the early gap lower and last operate a touch above worst levels of the day, -40 or so, while cash trade sees the major benchmarks running 3.5-4.5bp cheaper, with the wings leading the weakness.

• SONIA futures are flat to -3.5 on the day.
• The space has looked through the latest round of tier 1 Eurozone data prints, with no meaningful cross-market impact observed.
• Local headline flow remains light, outside of slightly firmer than expected credit and mortgage lending data.
• This leaves local focus on Thursday’s BoE monetary policy decision.
• BoE-dated OIS continues to show ~35bp of tightening for this week’s meeting, while terminal policy rate pricing continues to hover around 5.90%. Both these measures are comfortably shy of the recent hawkish extremes on the back of broader market fluctuations and the recent run of tier 1 domestic data. Markets and the sell-side remain relatively non-committal re: the size of the Bank’s next policy step, we will provide much more colour on that in our full BoE preview later this week.