Swaps - GBP
Swappers eyed aggressive 30y SONIA-BOR offers and standout 30y ASW flow today. But what drove the eruption of SONIA-BOR flow?
Gilts underperformed Bunds slightly in the 10y sector this afternoon, failing to end in the black even after the APF operation in the afternoon.
Traders pondered further steepening in UK breakevens if the market stays on its recent trajectory which has seen linkers outperform nominals
The absence of the DMO allowed the market to easily rally into APF buying today. Elsewhere, 10s/30s is finally positive and LCP eyes Covid.
A fairly passive pre-bank holiday session saw gilts follow USTs while traders worried whether gilts are excessively dependent on negative rate talk.
A fortnight of gilt market records continued with another red letter day today, as 5y gilt yields hit a new low. In linkers, IL28 did well.
In yet another first, the DMO sold nominal gilts with a negative yield for the first time. For some it's a sign that negative rates are now likely.
The syndication of the 2061 gilt saw 'gigantic' demand today, according to dealers, as GEMMs eye a flatter curve with the supply now out of the way.
As the FTSE staged an improbable 3.8% rally, gilts gave up their attempt to swim against the tide and the curve bear-steepened ahead of the 2061 sale.
While DMO and the BOE continue to cradle the market, rocking it gently back into a state of grace and calm, traders eye new flows, supply and events.