A Little Softer On The Day, BoE Rhetoric Eyed After Hot Services CPI

Gilts sit a little above session lows, with focus on today’s BoE decision.

• A tick lower in broader core global FI markets weighed at the open.
• Futures -7 at 98.45, with bears failing to force a test of technical support at 98.21.
• Yields are ~2bp higher across the curve, with recent ranges intact.
• 2s10s continues to sit a little below’24 highs.
• BoE-dated OIS is little changed on the day, showing ~41.5bp of cuts through year end.
• The first 25bp move is not fully discounted until the end of the Nov meeting, with just under 70% odds of a cut through the end of the Sep MPC currently showing.
• SONIA futures are +0.5 to -2.0, edging away from session lows alongside gilts.
• Looking ahead to today’s we believe that yesterday’s CPI data cements an unchanged 7-2 vote at today’s BoE decision, with rates set to be left unchanged.
• Yesterday’s services CPI reading will present the major point of worry for the MPC, after it topped BoE and wider sell-side expectations.
• We don’t think the data will provide a meaningful change to the BoE’s guidance/ overarching view, but that outcome cannot be completely ruled out.