STIR FUTURES: Sep'25 SOFR Sale

Gilts edge away from recent session lows, although markets seem keen to continue to fade rallies at this stage, with Chancellor Reeves offering little new in the Commons today.

• Reeves conceded that the UK is facing “economic headwinds”, while stressing the need to go further to kickstart growth and pledging to meet the fiscal rules at all times. A reminder that her future in the role is in doubt
• Futures as low as 89.15, last 89.23.
• Bearish technicals intact, initial support at cycle lows of 88.96.
• Yields little changed to 2bp higher, curve bear steepens.
• 10s & 30s within 3.5bp of cycle highs, located at 4.921% & 5.473%, respectively.
• Tomorrow’s 10-Year gilt supply is eyed, although today’s 30-Year I/L supply saw decent enough demand.
• CPI and comments from BoE dovish dissenter Taylor also due Wednesday.

• Sterling weakness continuing to stand out in G10 currency markets, as EURGBP extends session gains to 0.5%, registering a fresh two-month high in recent trade ~0.8443, helped by the quick fade of GBPUSD strength following the soft US data release.
• Price action for EURGBP narrows the gap to the next target of 0.8448, the Oct 31 high and a reversal trigger from a technical perspective. Further upside would signal scope for a move towards 0.8494, the August 26 high.
• The next key input for the Pound will be UK CPI, released tomorrow at 07:00 GMT, with focus on the services Y/Y figure for which consensus stands at a slightly softer 4.8% (vs 5.0% November). Our full preview for the release will be published shortly.

FRBNY EFFR for prior session:

• Daily Effective Fed Funds Rate: 4.33% (+0.00), volume: $104B
• Daily Overnight Bank Funding Rate: 4.33% (+0.00), volume: $306B