Wings Outperform, Supply Disappointing

The breach of 95.00 in gilt futures is short-lived and limited on spillover from the latest round of Bund weakness. Contract last +5, 25 ticks shy of best levels.

• Still, the softer than expected round of domestic GDP data means that pullbacks are limited.
• Cash benchmarks run flat to 2.5bp richer, with intermediates lagging the wings owing to the presence of/relatively tepid demand at today’s Jan-33 Gilt auction.
• SONIA futures are -1.0bp to +5.5bp with the late reds/early greens leading the general bid.
• BoE-dated OIS sits little changed to a touch softer on the day, showing 21bp of tightening for this month, while terminal policy rate pricing is 40bp above prevailing SONIA levels.
• While CPI & wage growth levels keep a hike firmly on the table at this month’s MPC, the recent run of economic activity & labour market data has started to promote questions re: the likelihood of further hikes.
• Local headline flow has been dominated by continued unease re: pension triple lock commitment among the ruling Conservative Party, as well as another round of slightly easier mortgage rates becoming available.