Halister News

(Bloomberg) -- Gilt 2s10s curve could come under further bull-flattening pressure, with 88bps support now cropping up on radar, the year-to-date low, Bloomberg technical analyst Sejul Gokal writes.

• See live chart here; 2s10s now at 93bps
• 2s10s curve steepening has faltered right against 13-DMA resistance at 98bps, with overhead ichimoku cloud providing further headwinds this week
  • MACD histogram is negative and far from Feb. and April extremes, suggesting flattening leg/momentum in its infancy
• Interim curve support at 91bps (May 18 low); deeper compression level seen at 88bps (low of French 1st round election day); larger objective at 76bps (61.8% Fibonacci of 2016 widening move)
  • A steeping move above 100bps could challenge the flattening bias, with a move above 105 bps (at close) to firmly negate the outlook
• Weaker-than-expected U.K. 1Q growth data, lower oil prices and narrowing gap between the Conservative and Labour parties in latest election poll have collectively helped underpin long-end gilts this week
• GBP OIS forward markets show decreasing bets on a rate hike by mid-2018. The implied odds of a 25bps increase by June 2018 has slumped to 32% vs. 80% about two months ago (assuming 4bps Sonia-base rate corridor)

• NOTE: Sejul Gokal is a technical strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.