GILTS: Curve Steeper, Lagging Bunds

• The DMO will kick off issuance for the week this morning with the first reopening of the 10-year 1.125% Sep-35 linker for GBP1.6bln nominal (following its launch a month ago).
• The launch auction was for a smaller GBP1.5bln amount and saw a bid-to-cover of 3.12x.
• This linker replaced the 0.75% Nov-33 linker as the on-the-run 10-year issue. Auctions for that linker were strong with the lowest bid-to-cover in the five auctions so far this fiscal year at 2.89x (with a mean of 3.16x and 3.39x seen in the last auction in December). All of these auctions have been for GBP1.5bln nominal.
• We expect another strong linker auction.
• Timing: Results will be available shortly after the bidding window closes at 10:00GMT with a further GBP400mln available to successful bidders at the PAOF.

Gilts rally at the open on tariff-driven worry, with reports pointing to wider EU countermeasures against U.S. tariffs and the U.S. pushing for tougher global restrictions surrounding Chinese semiconductor trade.

• Futures pierce initial resistance at the 50-day EMA (92.83), topping out at 92.91, before fading back to ~92.80 as the wider risk-off moves start to run out of momentum (equities off lows, DXY & T-Notes off highs)
• A fresh extension higher would expose the Feb 13 high (93.50) and reintroduce some momentum to the bullish technical cycle.
• Yields 2-3bp lower, light bull steepening.
• The DMO will come to market with GBP1.6bln of 1.125% Sep-35 I/L paper this morning.
• Elsewhere, we will get comments from BoE chief economist Pill, as he delivers closing remarks at the Bank’s BEAR conference.

• The Tech Index (SX8P) did gap lower on the Open, but the Estoxx futures (VGH5) is seeing BIG buyer on the Cash open, a 32 points bounce off the low, with over 20k lots going through in the past 5 minute window.
• VGH5 has fully recovered to trade back to flat on the Day.