US TSY FUTURES: BLOCKs: Separate 5Y & 10Y Crosses

• UK markets have been volatile but this week’s data is still very much in focus, with CPI data headlining on Wednesday.
• The median from the previews that we have read look for headline CPI to come in at 2.60%Y/Y (mean 2.61%Y/Y, Bloomberg consensus is 2.6%Y/Y). This is 14 hundredths above the BOE’s 2.46%Y/Y forecast.
• In terms of services CPI, the median of the previews we have read is 4.75%Y/Y (mean 4.79%Y/Y; Bloomberg median 4.8%Y/Y).
• The main drivers in the slowdown in headline CPI in December versus November are air fares, core goods and tobacco, with petrol prices expected to offset these moves to some extent. We look at these factors in more detail.
• The factor with the potential to have the largest impact on CPI is the choice of price collection date. This is widely expected to be Tuesday 10 December (quite early in the month and quite far away from Christmas). However, there is a chance that the ONS selects Tuesday 17 December. We discuss the impact of the collection date on the release.
• We also summarise 14 sellside analyst views.

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Gilt futures finished lower for an eight consecutive session on Monday, settling 311 ticks below their December 31 settlement level.

• Yesterday saw the first pullback in contract OI over that period, pointing to net long cover on the day.
• OI data had pointed towards net short setting in every other session of ’25.
• The contract is on track for another lower close today (although is only -4 last), with next support located at the month-to-date intraday low (88.96).

• +50,000 TYH5 108.5 calls, 27 vs. 107-08.5/0.31%, total volume just over 57,000 - exceeding open interest of 31,317 coming into the session