GILTS: Early Recovery Trimmed, Curve Flatter
Gilts are off session highs, with equity futures off session lows and crude oil regaining some poise.
- Cross-market moves drove the early bid, with a lack of definitive progress in the Trump-Putin meeting (particularly when it comes to a palatable proposal for Ukraine) noted.
- Elsewhere, others pointed to the market fading some of Friday’s bear steepening (which similarly lacked a clear headline trigger, with ongoing European focus on fiscal matters/issuance outlooks and Dutch pension reform noted back then).
- Futures as high as 91.32 after trading 90.91 on Friday. Last ~91.10.
- Still, bears remain in technical control. Fresh extension lower would target the May 29 low (90.59).
- Conversely, bulls need to clear the 50-day EMA (92.05).
- Yields 1-2bp lower, curve flatter.
- The early June high in 10-Year yields (4.702%) remains intact.
- A reminder that 50s registered a fresh cycle high on Friday, but bears failed to force a test of 5.00%.
- The 5s30s curve continues to hover just below Friday’s multi-year highs (last 146.5bp), 150bp is the next upside target.
- BoE-dated OIS prices 13.5bp of easing through December and 24bp of cuts through February, little changed on the day.
- Wednesday’s CPI data headlines the domestic calendar this week, see our morning STIR bullet/global week ahead publication for more colour on that front and expect our usual detailed preview in due course.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.973 | +0.5 |
Nov-25 | 3.891 | -7.7 |
Dec-25 | 3.834 | -13.3 |
Feb-26 | 3.729 | -23.8 |
Mar-26 | 3.691 | -27.7 |
Apr-26 | 3.617 | -35.1 |
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JGB TECHS: (U5) Returns Toward Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 138.08 @ 16:31 GMT Jul 18
- SUP 1: 137.70 - Low Jul 16
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs hold above recent lows, however a bearish theme remains intact following the reversal posted off the mid-June highs. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, the first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
CANADA: July BOC Cut Pricing: From Distinct Possibility To Negligible This Week
The implied probability of a July BOC rate cut has gone from a distinct possibility to negligible this week, following Tuesday's firmer-than-expected core inflation data.
- The accompanying chart shows implied pricing (in percentage points) for July's BOC decision - it dropped from around 30% implied (7+bp) prior to the labour market report last Friday, to under 20% going into CPI (4+bp), reducing after that to under 10% (<2bp).
- For the year as a whole, markets have priced out about 15bp of cuts through those two data points - now seeing about 15bp of easing through December. As such, it's very much in question whether the BOC's easing cycle is already at an end.
- Apart from the ongoing US-Canada trade negotiations, next week's scheduled highlight will be the BOC's Business Outlook Survey out Monday, followed by May Retail Sales out Thursday which will be the final major input into the macro puzzle for the BOC going into its decision on July 30.
| Meeting | Current | Last week's close (Jul 09) | Change since then | Cumulative Change From Current Rate (bp) |
| Jul 30 2025 | 2.74 | 2.68 | 5.6 | -1.9 |
| Sep 17 2025 | 2.69 | 2.60 | 9.3 | -6.0 |
| Oct 29 2025 | 2.65 | 2.53 | 12.1 | -10.5 |
| Dec 10 2025 | 2.61 | 2.45 | 15.7 | -14.6 |
USDCAD TECHS: Has Pierced The 50-Day EMA
- RES 4: 1.3920 High May 21
- RES 3: 1.3862 High May 29
- RES 2: 1.3798 High Jun 23
- RES 1: 1.3747/74 50-day EMA / High Jul 17
- PRICE: 1.3715 @ 16:56 BST Jul 18
- SUP 1: 1.3639/3557 Low Jul 08 / 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD is trading closer to its recent highs. Attention is on resistance at 1.3747, the 50-day EMA. It has been pierced. A clear break of it is required to highlight a possible stronger short-term reversal. This would open 1.3798, the Jun 23 high. For now, a bear trend remains firmly in place. A resumption of weakness would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the downtrend.
