EQUITIES: ESA Pinned Between DMAs, Shrugs Off Tax Bill Weakness

Gilt futures have regained around 30 of the ~40-tick sell off seen at the turn of the hour.

• The move lower in futures came as the IMF downgraded their economic growth outlook for the UK, which, when coupled with the already fragile fiscal backdrop and thinner-than-usual liquidity, weighed on gilts.
• This serves as a reminder of UK market sensitivity to headlines pointing to a deepening of the well-documented fiscal issues, which stem from limited fiscal headroom and tepid economic growth.
• Still, the prospect of deeper rate cuts from the BoE provides some insulation, meaning the contract stopped short of testing previous session lows.
• Spill over from a bounce in Tsys had seen futures trade as high as 92.56 ahead of the headlines, although initial resistance at 92.63 remains untouched.
• Curve steepening theme remains intact, with yields 6bp lower to 2bp higher on the day.

• Decent program buyer on the Cash Open with 2006 names, the most since the 9th April.
• The early bids on the Equity Cash Open are met by sellers, and SPX is still short of Yesterday's high of 5232.94, now trading at 5222.62.

+6,500 FVM5 108-10.75, buy through 108-10.25 post time offer at 0931:33ET, DV01 $266,000. The 5Y contract trades 108-10.5 last (-1)