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2026-09-16 18:58:08
[UK Bonds Receive Double Support, Yield Curve Steepens] ⑴ Moderate UK core inflation data, coupled with a decline in oil prices, provided buying support for UK gilt futures, leading to lower yields across the board. ⑵ Brent crude futures fell more than 1% to around $108 per barrel, as a report showed a larger-than-expected increase in US crude oil inventories, with gasoline and diesel inventories also rising, while the market had expected a decline. ⑶ December UK gilt futures are currently up about 52 ticks to 84.58. Price action today was volatile before the US stock market opened, with the market adjusting positions in anticipation of the key Fed rate decision later in the day. ⑷ The contract gapped up at the Asian session, came under pressure again before the inflation data release, and then rebounded more than 20 ticks after the August core annual inflation rate was flat compared to the previous month, with the slight increase in overall inflation in line with expectations. ⑸ The data seemed to alleviate market concerns about the risk of increased inflation due to the Iranian oil shock, triggering a repricing of front-end yields in the morning session. (6) The UK gilt curve steepened in a bull market, with the 2-year yield falling by about 6.5 basis points to 4.82%, and the 10-year yield falling by about 4 basis points to approximately 5.34%, resulting in a steepening of about 2.5 basis points in the 2s/10s segment. (7) This was a UK-led trend, with German yield curve yields rising only slightly, while US Treasury yields fell by about 1 to 2 basis points, also led by the front end.
