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5-30-year yields now below post-June MPC levels

GILTS
  • As noted earlier, gilts have moved higher today. Initially driven by misses in European PMIs, but then finding a little stability as the UK PMI didn't come in quite as weak as the European data had suggested. The UK PMI also pointed to a strong labour market and continued inflationary pressures, meaning the reasons for hikes remain in place (albeit as we have long argued, not at the pace markets had priced - we still see around a 60% probability of a 50bp hike in August with the alternative a 25bp hike - markets still after today's data price 53bp for August).
  • Yields at the very front-end of the gilt curve remain higher than the post-June MPC reaction, as do 30+ year yields, but between 5-30 years, yields are now lower than the initial reaction.
  • As well as PMI data, this morning saw the release of public sector finance data which weren't market moving but saw borrowing at higher levels than expected.
  • Overnight tonight we will receive consumer confidence data for June ahead of tomorrow morning's retail sales print for May. These will give a further update on the state of the consumer following the increase in NICs and the energy price cap - both of which came into effect in April.
  • Tomorrow afternoon will see another speech from BOE Chief Economist Huw Pill on ‘Inflation and Debt – Challenges for Monetary Policy after Covid-19’ - an interesting topic but he has already made several appearances since last week's MPC meeting so it is unclear whether he will give much new immediate policy-relevant guidance. MPC member Jonathan Haskel also appears on a panel on the global economy tomorrow.

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  • As noted earlier, gilts have moved higher today. Initially driven by misses in European PMIs, but then finding a little stability as the UK PMI didn't come in quite as weak as the European data had suggested. The UK PMI also pointed to a strong labour market and continued inflationary pressures, meaning the reasons for hikes remain in place (albeit as we have long argued, not at the pace markets had priced - we still see around a 60% probability of a 50bp hike in August with the alternative a 25bp hike - markets still after today's data price 53bp for August).
  • Yields at the very front-end of the gilt curve remain higher than the post-June MPC reaction, as do 30+ year yields, but between 5-30 years, yields are now lower than the initial reaction.
  • As well as PMI data, this morning saw the release of public sector finance data which weren't market moving but saw borrowing at higher levels than expected.
  • Overnight tonight we will receive consumer confidence data for June ahead of tomorrow morning's retail sales print for May. These will give a further update on the state of the consumer following the increase in NICs and the energy price cap - both of which came into effect in April.
  • Tomorrow afternoon will see another speech from BOE Chief Economist Huw Pill on ‘Inflation and Debt – Challenges for Monetary Policy after Covid-19’ - an interesting topic but he has already made several appearances since last week's MPC meeting so it is unclear whether he will give much new immediate policy-relevant guidance. MPC member Jonathan Haskel also appears on a panel on the global economy tomorrow.