GILTS: Rallying With Peers, ~40bp Of BoE Cuts Showing Through Dec
The bid in bonds (drivers detailed in recent bullets) takes gilt futures through yesterday’s highs, topping out at 91.57 so far.
- Initial resistance of note still located at the May 20 high (91.87)
- Yields 4-7bp lower across the curve.
- 10-Year yields remain in the multi-year uptrend detailed in recent weeks, with bears needing to force a break above Mar & April highs (4.800/809%) to open the way higher.
- Dovish repricing in GBP STIRs accompanies the move in gilts, with BoE-dated OIS now showing ~39bp of cuts through year-end vs. ~34bp seen for much of today.
- SONIA futures 0.25-7.0 higher, last week’s lows in SFIZ5 remain untested. SONIA futures implied terminal rate pricing (proxied by SFIZ6) last ~3.61% vs. closer to 3.80% seen at one point last week.
- We have published our latest UK deep dive.
- BoE Governor Bailey will speak after the close (20:00 London) although the text is due to be released in less than an hour (16:00 London).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.208 | -0.3 |
Aug-25 | 4.089 | -12.2 |
Sep-25 | 4.043 | -16.8 |
Nov-25 | 3.895 | -31.5 |
Dec-25 | 3.823 | -38.7 |
Feb-26 | 3.716 | -49.5 |
Mar-26 | 3.701 | -51.0 |
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EQUITIES: EU Bank put spread
SX7E (20th June) 177.5/165ps, bought for 2.7 in 10k vs 1.7k at 184.50.
US 10YR FUTURE TECHS: (M5) Bull Cycle Extends
- RES 4: 113-22 1.382 proj of the Apr 11 - 16 - 22 price swing
- RES 3: 113-04 76.4% retracement of the Apr 7 - 11 bear leg
- RES 2: 112-12 61.8% retracement of the Apr 7 - 11 bear leg
- RES 1: 112-08 High Apr 8
- PRICE: 112-03+ @ 15:02 BST Apr 29
- SUP 1: 111-04+ 20-day EMA
- SUP 2: 110-16+/109-08 Low Apr 22 / 11 and the bear trigger
- SUP 3: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
- SUP 4: 108-21 Low Feb 19
Treasury futures are trading higher today as the contract extends the latest rally. Recent gains have resulted in a break of 111-25, 50.0% of the Apr 7 - 11 bear leg. The breach undermines a recent bearish theme and opens 112-12, the 61.8% retracement. On the downside, a reversal and a resumption of weakness, would refocus attention on 109-08, the Apr 11 low and the bear trigger. First key support to watch is 110-16+, the Apr 22 low.
TARIFFS: Tariff Revenue Can Provide Tax Relief In Upcoming GOP Bill - Bessent
Summary of Treasury Secretary Scott Bessent’s remarks at a recently concluded press conference at the White House. He covers much of the same ground as interviews with Fox and CNBC yesterday.
- Asked if the ultimate goal of tariffs is long-term revenue or favourable trade deals, Bessent says “it’s a combination of both.” Adds: “We’re going to take in long-term tariff revenue,” and stresses “18 important trading relationships” with whom the administration will continue negotiations in the coming weeks.
- Bessent says he thinks “there is a very good chance” of tariff revenue providing incoming tax relief in the upcoming Republican reconciliation ‘big beautiful bill’.
- Bessent specifically notes that tariff revenue could be used to provide tariff relief on Trump’s campaign trail tax pledges: No tax on tips, social security payments, overtime wages, and deductibility for US-made autos.
- Bessent refuses to be drawn on whether Chinese and US officials are engaged in active discussions on trade: “We’re not going to talk about who’s talking to whom…” He adds that “the onus is on them to take off these tariffs”.
- Asked when the first trade deals could be announced, Bessent says a problem for markets is that Trump creates “strategic uncertainty” in negotiations, but he notes that the “aperture of uncertainty is narrowing” indicating deals could be announced soon.
- He reiterates that Japan, India, and South Korea have been “most forthcoming” on striking a deal. He says he sees the “contours of a deal” with South Korea and confirms “substantial talks” with Japan.
- Bessent says he doesn’t expect supply chain shocks as he believes retailers are likely to have managed their inventory ahead of the new tariff rate.
