GILTS: Yields A Little Lower, Cross-Asset Cues Dominate
Gilt futures hold away from yesterday’s lows, with crude oil continuing to trade lower and European equity benchmarks in the red.
- Contract last +10 at 91.15.
- Initial support and resistance located at 90.96 & 91.95, respectively, bear cycle intact.
- Yields 1.0-2.5bp lower, light outperformance in the long end.
- 2-Year yields still top 4.00% after yesterday’s close above, while 10s print at 4.70%, respective April highs remain unchallenged.
- Spread to Bunds ~1.5bp wider on the day at 202.5bp, with contained swings either side of 200bp seen in recent sessions.
- Soft pricing metrics were seen at the GBP2.0bln sale of the 0.125% Jan-28 gilt. Still, the yield on the line moved 0.5bp lower post-supply, representing a removal of concession.
- GBP STIR pricing little changed on the day. SONIA futures +1.5 to -1.5.
- BoE-dated OIS shows 1.5bp of cuts for next month, 18bp through August, 24bp through September, 37bp through November and 44bp through year-end, contracts are flat to 2.5bp more dovish on the day.
- Dovish BoE dissenter Dhingra will speak this afternoon (15:00 BST), although the topic of her address (“EU macroeconomic policy in an age of shocks”) may limit scope for updated comments surrounding her dovish stance.
- That will leave macro cues at the fore. U.S. PPI (which may be deemed stale, akin to the recent CPI reading) and weekly jobless claims readings headline the data calendar.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.194 | -1.7 |
Aug-25 | 4.033 | -17.8 |
Sep-25 | 3.968 | -24.2 |
Nov-25 | 3.838 | -37.3 |
Dec-25 | 3.772 | -43.9 |
Feb-25 | 3.686 | -52.4 |
Mar-25 | 3.676 | -53.5 |
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EGBS: Shallow Pullback In Bund Futures On Equity Rally and Supply
Pullbacks in Bund futures have been shallow, with tariff-related uncertainty and expectations for an ECB cut on Thursday somewhat offsetting pressure applied by this morning's European equity rally and sovereign supply calendar.
- Futures are +22 ticks at 131.26, down from session highs of 131.57. The bull trigger is defined at 132.03 (Apr 7 high), with the 20-day EMA at 129.73 continuing to provide support.
- German cash yields are within 1bp of yesterday’s closing levels, the curve lightly twist flattens.
- Germany will look to sell E4.5bln of the 2.40% Apr-30 Bobl at 1030BST. Finland also comes to the market this morning.
- The ECB’s Q1 BLS shouldn’t change expectations for a 25bp cut on Thursday, but may contribute to wording tweaks in the policy statement, with the results consistent with “meaningfully less restrictive” policy.
- EGB spreads to Bunds little changed to 3.0bp wider on the day. OATs outperform Bunds at the margin (0.5bp tighter), with little of note when it comes to French news flow. We don’t see a meaningful headline driver for the widening in GGBs (~3.0bp vs. Bunds to 88bps).
- This morning’s other data weren’t material market movers: The German April ZEW survey saw a much weaker than forecast expectations component (-14.0 vs 10.0 cons, 51.6 prior), owing to tariff uncertainty and a DAX pullback. February Eurozone IP was stronger-than-expected at 1.1% M/M (vs 0.3% cons, 0.6% prior).
GILTS: Off Highs Around Auction, Most Of Cross-Market Outperformance Intact
The presence of this morning’s 10-Year supply seemed to limit the rally in gilts.
- Bulls were unable to breach 92.00 in futures, with the contract topping out at 91.99 ahead of the bidding deadline.
- Decent demand metrics at the auction then pushed the space back towards, but not to, session bests.
- Futures have peaked at 91.99 for now, with the contract seeing a more meaningful break above the 20-day EMA (91.81). Next resistance located at the April 8 high (92.63), although there may be some focus on April 10 low in 10-Year yields (4.616%).
- Yields 1-4bp lower across the curve, bull steepening.
- Outperformance vs. core DM peers intact (outside of U.S. 30s), with some focus on the softer elements of this morning’s labour market data (wage and payroll components).
- Dovish reaction in GBP STIRs to the data/long end rally.
- BoE-dated OIS prices just over 75bp of cuts through year-end, with 23bp of cuts discounted for next month.
- SONIA futures flat to +6.0. Last week’s highs intact across the strip.
- UK CPI data due tomorrow, with the median of the sell-side surveys that we read showing downside risks to both the BBG median and BoE expectations (our full preview is here).
- Expect macro cues to dominate between now and then.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.226 | -23.2 |
Jun-25 | 4.141 | -31.7 |
Aug-25 | 3.953 | -50.6 |
Sep-25 | 3.850 | -60.8 |
Nov-25 | 3.714 | -74.5 |
Dec-25 | 3.672 | -78.6 |
COMMODITIES: Bearish WTI Theme Intact
The trend condition in Gold remains bullish and price is trading at its recent highs. The yellow metal last week traded through $3167.8, the Apr 3 high, to resume the primary uptrend and trade to fresh all-time highs. A bearish theme in WTI futures remains intact and the rally last Wednesday is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels.
- WTI Crude down $0.04 or -0.07% at $61.46
- Natural Gas up $0.01 or +0.33% at $3.331
- Gold spot up $18.16 or +0.57% at $3228.3
- Copper down $0.85 or -0.18% at $467.5
- Silver up $0.01 or +0.02% at $32.3408
- Platinum up $6.5 or +0.68% at $959.09
