United Kingdom Flaming June

Research evidence excerpt

United Kingdom Flaming June

Francis Diamond AC (44-20) 7134-1504 Global Markets Strategy J P M O R G A Nfrancis.diamond@jpmorgan.com

J.P. Morgan Securities plc 26 June 2026

Marcus Mayfield (44-20) 3493-8050

marcus.mayfield@jpmorgan.com

J.P. Morgan Securities plc

United Kingdom

Flaming June

• Gilt yields have rallied across the curve over the past week with 10Y gilt yields

around 15bp lower and with gilts rallying in line with Bunds

• Given the decline in oil prices, MPC OIS now prices 24bp of hikes by the end of this

year and a cumulative peak of 30bp of hikes by next March.Our conviction on the

timing of a BoE hike has fallen given the decline in energy prices further reduces

any urgency and allows the BoE more time to evaluate the indirect effects

• At the front end we keep: 1) tactically paid Sep26 MPC OIS, 2) short Jun27 3M

SONIA futures vs. Jun27 Euribor

• We continue to pay the belly of the 1Y/1Yx1Y/2Yx1Y SONIA fly

(3Mx1Y/15Mx1Y/27Mx1Y) as a carry trade and as a modest bearish proxy as we

think 1Yx1Y SONIA is unlikely to rally significantly further

• Expect 10Y gilts to trade in a relatively narrow range around the 4.75-4.80% level.

• 2s/10s gilt curve looks fair value on a short-term regression basis. Keep 10s/30s gilt

curve flattening bias

• 2Y gilt swap spreads look fair value vs. the level of 1Yx1Y SONIA and adjusting

for GC-SONIA spreads and any announcement of reduced leverage ratio con-

straints at the 7th July FPC meeting could result in modest widening of front end

swap spreads

• 10Y swap spreads are at the wide end of recent ranges but we see limited near-term

narrowing pressure given focus on fiscal policy details will likely only increase clos-

er to the autumn budget

• In volatility, we close 1Yx5Y/1Yx10Y volatility curve steepeners and conditional