EM CEEMEA CREDIT: DRC: IMF reaches SLA

Gilts continue to hold onto the bulk of the weakness linked to the political situation in Japan and France.

• Solid demand at the latest round of BoE APF sales of short maturity gilts (3- to 7-Year) is worth a ~1bp rally in 3-, 5- & 7-Year benchmarks, helping the space further away from session lows.
• Futures -22 at 90.72 vs. session lows of 90.41.
• Bears remain in technical control. Initial support and resistance in futures still located at 90.26 & 91.28, respectively.
• Yields 1-4bp higher vs. Friday’s close, curve still steeper on the day.
• SONIA futures +0.5 to -2.5, twist steepening.
• BoE-dated OIS continues to price ~5bp of easing through year-end, which we think is underappreciating the odds of a cut during that window.
• BoE Governor Bailey is due to speak today, delivering the keynote speech at Scotland’s Global Investment Summit 2025. The text will be released at 16:00 London.
• There is no title attached to the speech and it is therefore unknown at this point whether Bailey will be discussing anything relevant for monetary policy.
• We will provide a little more colour ahead of the speech.

TYZ5 114/116cs, bought for 13 in 5k.

• Note that almost 2/3 of the bids received in today's APF operation were for the 4.25% Jun-32 gilt and around 1/4 of the 1.625% Oct-28 gilt.
• Bids for the other six gilts on offer today only totalled GBP231.5mln.
• So the strong bid-to-cover of 3.03x (first time 3x of higher since September 2024) is a bit misleading to the breadth of demand in the operation.