GILTS: CPI-Driven Outperformance Holds Despite Pullback From Highs
This morning’s soft UK CPI data drives outperformance for gilts, as wider core global FI markets pull back from session highs alongside a recovery rally in oil.
- Gilt futures last +45 at 91.39 vs. early session highs of 91.78.
- Initial resistance at 91.64 has been pierced, fresh upside would target more meaningful resistance at 91.93. Conversely, initial support is located at yesterday’s low (90.50).
- Yields 3-5bp lower, 5s outperform.
- Initial yield support levels of note went untested across the curve.
- A reminder that 10-to 30-Year yields registered fresh month-to-date highs yesterday.
- The gilt/Bund spread briefly traded below the September ’24 closing low (162.01bp) before moving back above. Attempted breaks lower failed in recent weeks.
- GBP STIRs fade from dovish session extremes, with BoE terminal rate pricing once again failing to hold moves below 3.30%.
- BoE-dated OIS prices 23.5bp of easing for tomorrow and ~66.5bp of cuts through December ’26. Liquid contracts are 1.5-7.5bp more dovish on the day.
- SONIA futures 2.5-7.0 higher. Fresh cycle highs for SFIZ6 and cycle lows for SFIZ5/Z6 seen following the CPI data.
- With a cut BoE at tomorrow’s decision effectively cemented by this morning’s data, one question now is will there be enough in the data to convince any additional "hawkish" MPC member, in addition to Governor Bailey, to support a cut.
- Expect our full preview of that event later today.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.741 | -23.4 |
Feb-26 | 3.676 | -29.8 |
Mar-26 | 3.574 | -40.1 |
Apr-26 | 3.460 | -51.5 |
Jun-26 | 3.414 | -56.1 |
Jul-26 | 3.353 | -62.2 |
Sep-26 | 3.333 | -64.2 |
Nov-26 | 3.312 | -66.2 |
Dec-26 | 3.310 | -66.4 |
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EQUITY OPTIONS: BNP Put seller
BNP (18/12/26) 68p, sold at 8.4 in 2k.
GERMAN T-BILL AUCTION RESULTS: 12-Month Bubill
| Type | 12-month Bubill |
| Maturity | Nov 18, 2026 |
| Allotted | E1.852bln |
| Previous | E2.552bln |
| Total sold | E3bln |
| Target | E3bln |
| Avg yield | 1.937% |
| Previous | 1.870% |
| Bid-to-cover | 1.69x |
| Previous | 2.93x |
| Bid-to-offer | 1.04x |
| Previous | 2.49x |
| Previous date | Oct 13, 2025 |
GILTS: Recovering But Yields Still Comfortably Higher Than Thursday
Gilts have rallied but yields are still 5-14bp above Thursday’s closing levels after Chancellor Reeves’ apparent u-turn when it comes to raising income taxes increased the fiscal risk premium in gilts.
- Weekend press reports were focused on smaller taxes and opinion pieces surrounding fiscal policy, nothing to really move the market.
- Futures +12 at 92.27.
- Initial support of note located at 91.82, while bulls ultimately need to close Friday’s opening gap lower (~93.35) to start turning the technical tide back in their favour.
- Yields 2.5-3.5bp lower, curve steepening.
- 2s10s trades less than 1bp from its October closing high (located at 74.26bp), while 5s30s is a little over 1bp off its October closing high (located at 140.12bp).
- Dovish adjustment in GBP STIRs given the move further out the curve. SONIA futures flat to +3.0. BoE-dated OIS little changed to 2bp more dovish on the day, showing 18bp of easing for December, 26.5bp through February and 34bp through March.
- BoE MPC member Mann will speak this afternoon (13:20 London). We have previously suggested that speeches from MPC members outside of Governor Bailey are likely to have less impact for markets in the run up to the December decision (given their entrenched views).
- CPI data (Wednesday) headlines this week’s UK calendar (see our gilt Week Ahead & morning STIR bullet for more on that release, our full preview will cross in due course).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.788 | -18.2 |
Feb-26 | 3.704 | -26.6 |
Mar-26 | 3.628 | -34.2 |
Apr-26 | 3.537 | -43.3 |
Jun-26 | 3.499 | -47.1 |
Jul-26 | 3.457 | -51.3 |
Sep-26 | 3.445 | -52.5 |
