GILTS: Off Lows As Support Holds & Oil Softens, 50bp BoE Cuts Priced Through Dec
Gilts trade away from lows after support in futures held and with oil prices edging lower. Still, yields are higher across the curve in the wake of this morning’s firmer-than-expected CPI reading.
- Gilt futures last -16 at 91.41 vs. session lows at 91.17. June 2 low (91.16) provides key support.
- Yields 1.5-2.5bp higher, 5s under the most pressure.
- 2s remain rangebound.
- 10s briefly pierced the June 9 high (4.673%).
- STIRs price around ~50bp of cuts through year-end, with over 80% odds of the next cut priced through August. Market priced ~58bp of cuts through year-end at one stage on Monday.
- A reminder that while the UK CPI data was firmer-than-expected it wasn’t too out of line vs. BoE expectations.
- That means that the market remains comfortable with discounting a once per quarter rate cutting cycle through year end, given the softening labour market and still stagnant economic growth.
- What’s more, BoE Governor Bailey’s weekend comments were dovish and centred on the labour market, which increases the importance of tomorrow’s labour market data release.
- The 4.50% Sep-34 gilt PGT saw solid enough demand and pricing metrics but wasn’t quite as well-received as yesterday’s PGT.
- Little of note on the UK calendar for the remainder of the day, leaving focus on U.S. PPI data and any ongoing reaction to the domestic CPI print.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.009 | -20.8 |
Sep-25 | 3.956 | -26.1 |
Nov-25 | 3.794 | -42.3 |
Dec-25 | 3.710 | -50.7 |
Feb-26 | 3.582 | -63.5 |
Mar-26 | 3.549 | -66.8 |
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GILTS: Off Lows, Curve Twist Steepens
Gilts recover from session lows with oil moving further away from Asia-Pac highs (albeit holding comfortably above late Thursday levels) and with the recovery from overnight lows in the major global equity index futures stalling a little.
- More widely, attention remains on the Israel-Iran situation, with rhetoric not signalling de-escalation in the immediate term.
- Gilt futures trade as low as 92.23, breaking Friday’s low, before a recovery to 92.50, -15 on the day.
- The recent uptrend had taken the contract into overbought territory.
- Bears now target the 20-day EMA (92.04), which provides the first firm support level.
- Yields 1.5bp lower to 1.5bp higher, curve twist steepens.
- 2s10s in multi-week range, ~63.5bp last.
- 5s30s back above 120bp after Friday’s close below.
- Domestically, focus is on Wednesday’s CPI data (we have already flagged downside risks to that release) and Thursday’s BoE decision (softer economic growth and labour market data shouldn’t result in a cut at this stage, which will leave focus on the vote split).
- BoE-dated OIS back to pricing ~47bp of BoE cuts through year-end, little changed on the day after briefly showing ~45bp post-gilt open. 0.5bp priced for this week, 19bp through August, 24.5bp through September, 40bp through November.
- SONIA futures +1.5 to -1.5, strip twist steepens.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.208 | -0.5 |
Aug-25 | 4.021 | -19.0 |
Sep-25 | 3.965 | -24.6 |
Nov-25 | 3.812 | -39.9 |
Dec-25 | 3.740 | -47.1 |
Feb-26 | 3.629 | -58.2 |
Mar-26 | 3.602 | -60.9 |
GERMAN T-BILL AUCTION RESULTS: 12-Month Bubill
| Type | 12-month Bubill |
| Maturity | Jun 17, 2026 |
| Allotted | E2.445bln |
| Previous | E2.265bln |
| Total sold | E3bln |
| Target | E3bln |
| Avg yield | 1.808% |
| Previous | 1.873% |
| Bid-to-cover | 2.14x |
| Previous | 2.65x |
| Bid-to-offer | 1.74x |
| Previous | 2x |
| Previous date | May 12, 2025 |
BUND TECHS: (U5) Corrective Pullback Extends
- RES 4: 132.42 2.000 proj of the May 14 - 20 - 22 price swing
- RES 3: 132.00 Round number resistance
- RES 2: 131.85/95 High Apr 22 and the bull trigger / High Jun 13
- RES 1: 131.06 50.0% retracement of the Jun 13 - 16 downleg
- PRICE: 130.49 @ 10:12 BST Jun 16
- SUP 1: 130.17 Intraday low
- SUP 2: 130.12 Low Jun 5 a key short-term support
- SUP 3: 129.30 Low May 22
- SUP 4: 128.97 Low May 14 and a reversal trigger
Bund futures have traded lower today, extending the reversal from Friday’s session high. For now, the move down is considered corrective and key short-term support to watch lies at 130.12, the Jun 5 low. A break of this level would highlight a stronger reversal and undermine the bullish theme. Key short-term resistance and the bull trigger, has been defined at 131.95, the Jun 13 high.
