GILTS: Futures Through Resistance, BoE Eyed

Gilts have rallied, with weakness in European equities and spillover from the post-Fed bid in Tsys providing support this morning.

• Futures have broken above key resistance at the March 7 high (92.63).
• Fresh extension higher would target the Mar 4 low (93.06), a break there would deepen the threat to the bearish technical theme.
• Yields 3.5-5.5bp lower, 10s outperform.
• 10s 2bp tighter vs. Bunds, spread last ~181bp. Multi-week range intact.
• It would be a huge surprise to us, markets and sell-side economists if there was anything other than a pause in the MPC’s cutting cycle come the end of today’s decision, with unchanged guidance also expected.
• The vote split is set to garner much of the interest, with the number of plausible dovish dissents ranging from two to four - we suspect, with a low conviction, that there could be three, one more than consensus.
• Click for our full preview of the event.
• BoE-dated OIS shows ~54bp of cuts through year-end, with some erroneous BBG quotes now smoothed out, market indicating ~17bp of cuts through May, 22.5bp through June and 36bp through August. We look for the next cut to come in May.
• SONIA futures move dovishly in sympathy with the move in the long end, last flat to +5.0.