BoE Tightening Pricing Moderates, Front End Swap Spreads Narrow, Gilt Curve Bull Steepens

The post-BoE FSR press conference continues, with BoE Governor Bailey flagging the mix of notable wage increases and the potential early signs of a loosening labour market.

• Gilt futures have a look through early highs and last sit +50 or so, still sticking within yesterday’s range. Cash Gilts are 3-7bp richer, bull steepening, with global core FI better bid ahead of the impending U.S. CPI release.
• The SONIA futures see as much as 10bp of richening as of typing, while BoE-dated OIS runs softer, as terminal policy rate rate-pricing looks back below 6.40%.
• The move lower in STIRs is spilling over into receiver side flows in the short end of the swap space, with 2- & 5-Year swap spreads narrowing, while 10+-Year swap spreads are little changed to a touch wider on the day.
• The post-BoE FSR press conference continues, with BoE Governor Bailey flagging the mix of notable wage increases and the potential early signs of a loosening labour market.
• The previously outlined DMO supply provides the next risk event for domestic markets, while the well-documented tier 1 global risk events will also be eyed in the London afternoon.