HALISTER1: Gilts Eye 1% as Yield Approaches Consecutive Close Below 200-DMA

Gilts Eye 1% as Yield Approaches Consecutive Close Below 200-DMA

(Bloomberg) -- U.K. 10-year yield is bracing for further declines below 1% if today it can confirm a back-to-back close below its long-term average line at 1.08%, Bloomberg technical analyst Sejul Gokal writes.
  • See chart here; Gilt 10-year yield at 1.05%
  • Yield on track to test 1.02% support which would pare by 50% the entire August to December 104bps steepening phase
  • Back-to-back close below 200-DMA at 1.08% would strengthen the upside case for gilts and revert attention on the ~95bps yield support (September high)
  • Additional support seen at 92-90bps, the 61.8% Fibonacci retracement of the August-December steepening phase and trend- channel lower band drawn from January
  • Yield resistance and risk zone for bulls seen at 113-115bps
  • U.K. 2/10 curve slipping below its 200-DMA at 94bps, first time since October with move driven by long-end outperformance
    • NOTE: March 23, Gilt 2/10 Curve May Flatten to 200-DMA at 93bps, Technicals Show
  • GBP OIS forward markets show decreasing bets on a rate hike by mid-2018. The implied odds of a 25bps increase by June 2018 have fallen from 88% observed in late March to 36% today (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.

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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