GILTS: Fresh Selling Seen, Although Ranges Remain Tight

The aforementioned pressure for Bunds spills into gilts before stabilisation is seen, more than reversing the post-U.S. data bid.

• Futures last -30 at 92.95, after registering fresh session lows at 92.86 but remaining comfortably within this week’s pore-existing range.
• The bullish technical outlook remains intact, but momentum is stalling.
• Initial support located at the 20-day EMA (92.64), while the June 25 high (93.57) presents initial resistance.
• Yields little changed to 3bp higher across the curve, 10s lead the weakness.
• Fundamentals continue to point to further curve steepening after the pullback from ’25 highs.
• Spread to Bunds last 190.5bp, unable to force a close below 190bp during this week’s tightening (spread move largely driven by the German issuance outlook). A break below 190bp would expose the April closing low (184.8bp).
• Final UoM sentiment data is set to provide the final major macro input of the week.
• Looking ahead to next week, final PMI’s and the latest DMP survey headline the UK data calendar, with BoE speak punctuated by Governor Bailey and dovish dissenter Taylor.
• BoE-dated OIS showing ~53bp of cuts through year-end after respecting the 55bp zone over the past couple of sessions.
• ~80% odds of a 25bp cut priced for August and 26.5bp showing through September.
• Supply-wise, the DMO will re-open the 4.375% Mar-28 gilt and the 1.50% Jul-53 green gilt.