US TSY OPTIONS: Jan'26 10Y Vol Buyer

Gilts hold off lows registered over the past couple of sessions, although yields still print 5-13bp higher across the curve when compared to Thursday’s closing levels.

• Curve now sees a parallel ~3bp shift lower yields, early steepening unwound.
• Futures last +16 at 92.31 vs. highs of 92.43.
• Initial support of note located at 91.82, while bulls ultimately need to close Friday’s opening gap lower (~93.35) to start turning the technical tide back in their favour.
• As we noted previously, while long end swap spreads indicate increased fiscal risk premium being priced in after Chancellor Reeves’ apparent u-turn when it comes to income tax rate hikes, those spreads are still well off year-to-date lows.
• AXA Investment Managers halved exposure to gilts on Friday, according to a senior fund manager that spoke to RTRS.
• Elsewhere, OI data pointed to net short setting dominating in futures on Friday.
• SONIA futures flat to +3.0. 
• BoE-dated OIS little changed to 2bp more dovish on the day, showing 18.5bp of easing for December, 26.5bp through February and 35bp through March.
• CPI data headlines the UK calendar this week (Wednesday), ahead of next week’s Budget (which will also be delivered on a Wednesday).
• Expect our full CPI preview to be published in due course.

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• MNI: US AUG CONSTRUCT SPENDING +0.2%
• US AUG PRIVATE CONSTRUCT SPENDING +0.3%
• US AUG PUBLIC CONSTRUCT SPENDING +0.0%