Morning PWLB Predictions

Gilts are firmer across all key tenors; expect a material downward adjustment at the 12:30 PWLB reset.

GILTS SNAPSHOT

• → 2y: 4.398% (-9bp) — Front-end leads the rally after inflation undershoot.
• → 10y: 5.043% (-8bp) — Belly follows, with yields sharply lower.
• → 30y: 5.718% (-7bp) — Long end also firmer, but slightly less so.

PWLB 12:30 RESET — PREDICTIONS

• → 1y: predicted 5.19% (unch)
• → 5y: predicted 5.59% (-2bp)
• → 10y: predicted 6.08% (-2bp)
• → 20y: predicted 6.60% (-2bp)
• → 30y: predicted 6.68% (-2bp)
• → 50y: predicted 6.46% (-1bp)

WHAT'S DRIVING THIS

• → UK inflation undershoots — April CPI YoY at 2.8% (forecast 3.0%, prev 3.3%), Core CPI YoY at 2.5% (forecast 2.6%, prev 3.1%); both below expectations, sparking a broad gilt rally.
• → News flow — Multiple outlets highlight the inflation drop and sharp market reaction; traders are paring back BoE rate hike bets.

CALENDAR

Releases so far today

• → Inflation Rate YoY — 2.80% vs 3.0% vs 3.30% (HIGH) — Lower than forecast; key driver for today's gilt rally.
• → Core Inflation Rate YoY — 2.50% vs 2.60% vs 3.10% (MEDIUM) — Also below expectations; reinforces downward pressure on yields.
• → Inflation Rate MoM — 0.70% vs 0.90% vs 0.70% (MEDIUM) — Slightly below forecast; adds to the softer inflation picture.

Still due today

• → 19:00 — USD FOMC Minutes — Forecast: n/a — Unlikely to affect the 12:30 PWLB reset.

Next 48 hours

• → Thu 09:30 — GBP S&P Global Manufacturing PMI Flash — Forecast: 53
• → Thu 09:30 — GBP S&P Global Services PMI Flash — Forecast: 51.7

A sharp inflation surprise has set the tone today; keep an eye on the PMIs tomorrow for the next potential catalyst.

This commentary is provided for information only and is not financial advice. Please verify rates directly with PWLB or official sources before acting.

Gilt Edge Advisor — The only thing falling faster than CPI this morning is the market's memory of last month's forecasts.