GILTS: Bullish Theme Intact

Gilts edge lower with core global FI pulling back from highs.

• Futures -14 at 92.21. Bulls remain in technical control after the break of several key resistance levels last week. Resistance is now layered in at 92.62/72/91, while initial support is located at 91.84.
• Yields flat to +1bp. The ’25 low in 10s (4.363%) remains untested and protects the base of the upward sloping triangle we have previously identified (4.339% today).
• Comments from BoE MPC member Taylor reaffirm his well-known dovish stance. He noted that “we can now see inflation at target in mid-2026, rather than having to wait until 2027 as in our previous projection. I see this as sustainable, given cooling wage growth, and I now therefore expect monetary policy to normalise at neutral sooner rather than later, as I said in the December minutes. Interest rates should continue on a downward path, that is if my outlook continues to match up with the data, as it has done over the past year”.
• No related movement in GBP STIRs given Taylor’s already well-defined dovish stance, SONIA futures incrementally more hawkish as the long end softens. BoE-dated OIS shows ~44bp of easing through Dec, little changed.
• On the supply front, the DMO will come to market with GBP4.5bln of the 4.75% Oct-35 line this morning.

Fig. 1: UK 10-Year Gilt Yields (%)

Source: MNI - Market News/Bloomberg Finance L.P.