Short Sterling futures narrowly mixed, Gilts likely to lag peers

The UK STIR strip has backed off from Tuesday’s highs in wake of BoE Governor Carney’s speech on Tuesday that focused on upside inflation pressure and could be a pre-cursor for a more hawkish QIR next week. Moreover, survey data overnight was better than expected (Gfk consumer confidence not as downbeat as expected and Lloyds’ business barometer, which has correlated well with PMI, improved markedly) and this may all weigh on Gilts despite positive external leads. Hence, the 10 year debt future is prone to underperform its core fixed counterparts and remain capped on any advance from the previous 122.38 settlement when it returns to Liffe shortly.