[MARKET ANALYSIS] Looking towards the Gilt open as the UK local election count continues

Gilts closed Thursday’s session at 87.53, firmer by around 14 ticks. As such, a correction lower to acknowledge the overnight geopolitical tensions is likely, but given the settling of the situation, it remains to be seen how far this runs. USTs are currently a few ticks firmer while Bunds are lower by around 20. More pertinently, will be the reaction to the ongoing local election count, with the poor Labour showing and likely leadership challenge(s) that will emerge in the days/weeks ahead to pressure Gilts further. However, again, it remains unclear as to how much is already priced in and whether the market will wait for the key areas outlined below. If pressure is seen, we look firstly to Thursday’s 87.13 base before 86.52 and 85.76 from the two sessions prior.
As it stands, on the local election, around 20% of the vote count has occurred, though significant areas such as Holyrood and the Senedd are yet to start tallying. The top-line is that Reform has benefitted significantly, at the expense of Labour, Green is doing well but appears to have seen some adverse impact from Polanski’s approach in recent days/weeks, while the Conservatives remain unpopular, but have swung back control from Labour in Westminster. Overall, the skew is for significant Labour losses, though perhaps not in excess of 1500 council seats, as some were suggesting, though this is unlikely to soften the blow in Labour HQ, but may give limited/temporary respite to Starmer. Pertinently, Hartlepool has moved entirely to Reform, Spectator’s Shipman reminds us that the last time Labour lost Hartlepool, Starmer had to be talked out of handing in his resignation.
Results will continue to come in across the day (and some on the weekend), the most pertinent numbers ahead are: Senedd (no time), Manchester (12:30BST), Lewisham (16:00BST), Barnsley (16:30BST), Hackney (17:00BST), Birmingham (18:00BST), Camden (18:00BST) & Holyrood (18:00BST). Times are all approximate.
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