2s Lead the Way Cheaper As BoE Terminal Pricing Touches 5.50%

Gilt weakness remains the story of the day in the wider core government bond sphere, with continued adjustment to yesterday’s UK CPI data evident.

• Bear flattening prevails, with the major Gilt benchmarks running 5.5-8.5bp cheaper as of typing, although it is only 2s that have moved beyond yesterday’s peak in yield terms. Futures are down ~100 ticks, but comfortably clear of yesterday’s low, for now.
• BoE-dated OIS now indicates a terminal rate of 5.50%, come the end of the Bank’s December gathering (the highest sell-side call we have seen on that front is 5.25%, more to come on that shortly).
• Comments from BoE’s Haskel headline the UK docket today, with CBI sales data not a traditional market mover.