US TSYS: Opening Losses More Than Reversed With Risk-Off On “Liberation Day"

Source: Bloomberg

Gilt futures -67 at 92.76, which is a fresh session low.

• The bullish short-term technical set up in the contract remains intact.
• Initial support at 92.72, followed by 92.22.
• Yields 5-6bp higher across the curve.
• Cross-market cues continue to dominate.
• Second-round pressure stemming from wider risk-on flow results in fresh session lows for gilts in recent trade.
• A reminder that reports pointing to more forceful short-term German fiscal spending drove an early sell off.
• That was before a recovery as markets assessed increased U.S.-Ukraine tensions, which presents greater inflationary risk but widens the left tail of the economic growth outlook.
• Final UK manufacturing PMI was slightly higher than flash but still comfortably sub-50.
• GBP STIRs follow the long end.
• 52bp of BoE cuts priced through year-end vs. ~56.5bp late Friday.
• ~18bp priced through May, ~23.5bp through June and ~36.5bp through August, we still look for a cut in May at this stage.
• SONIA futures flat to -7.5.
• Final services PMI data (Wednesday) and the BoE DMP survey (Thursday) headline this week’s UK data calendar.
• This week’s BoE-speak will come from Bailey, Pill, Mann, Greene & Taylor.
• Expect more detail on those events in our Gilt Week Ahead publication.