EU COMMUNICATIONS: NTT: Moody’s Downgrade

Gilts remain under pressure with bearish momentum in wider core global FI markets adding to downside impetus that followed the firmer than expected domestic CPI data.

• As we have noted elsewhere, while an element of an Easter effect was no doubt present, the CPI readings, particularly services inflation, were still firm, even when adjusting for Easter.
• Futures test next support at the April 11 low (90.47), a break would expose key support at the April 9 low (89.99).
• Yields 5-8bp higher, curve steeper.
• 2-Year yields move above the April 10 high (4.078%), peaking at 4.098%. The next upside level of note comes in at the downtrend line drawn off the January high (4.119% today).
• April 9/10 highs are unchallenged further out the curve.
• BoE-dated OIS shows 0bp of easing for next month, 11bp of cuts through August, 16bp through September, 28bp through November and 35bp through year-end.
• Contracts are little changed to 5bp more hawkish on the day.
• December MPC implied rates sit at the most hawkish level seen since April 10
• SONIA futures are 0.25-6.2bp lower.
• SFIZ5 filled the opening gap higher from April 3 before bouncing.
• Implied terminal rate pricing (proxied by SFIU6 at present) moves to 3.720% last.
• The DMO has noted that due to the ongoing market-wide Bloomberg system issues, the bidding window for this morning's auction of the 4% 2031 gilt is being extended. They expect the close time of the auction bidding window to be 11:30am, subject to Bloomberg systems issues being resolved.
• Little of note on the UK calendar for the remainder of the day outside of the auction, which will leave focus on macro inputs and continued digestion of the CPI data.

"Due to global technical problems with Bloomberg, the EU postpones the deadline for today's EUB auction by 1 hour from 12:00 CEST to 13:00 CEST in order to ensure a smooth functioning of the auction."

No pre-auction midprice available.