Bulk Of CPI-Driven Hawkish Move Holds

The bulk of the hawkish repricing that came on the firmer-than-expected UK CPI data has held.

• The sticky services components will promote some concern at the BoE, even when any Easter effects are adjusted for.
• Futures recovered from lows of 96.83, operating either side of 97.00 in the time since.
• Note that key support at the May 14 low (97.23) has given way, with any fresh extension lower set to expose the May 3 low (96.43). The latter protects the April 25 low and bear trigger (95.36).
• Gilt yields are 7-12bp higher across the curve, bear flattening. Both 2s10s and 5s30s registered fresh multi-week lows following this morning’s data.
• The data-driven concession ahead of today’s 5-Year auction proved enough to generate solid demand metrics as GBP4.0bn of 4.125% Jul-29 supply was easily digested.
• SONIA futures are 0.25 to 15.0 lower, holding the bulk of the initial CPI-driven move.
• BoE-dated OIS shows 9-15bp firmer across ’24 contracts, with a mere 2bp of easing now priced through next month’s meeting (~11bp was showing late yesterday), 11bp of cuts showing through August (that was close to fully discounting a 25bp cut at yesterday’s close) and ~39bp of easing showing through year end (vs. ~53bp at yesterday’s close)
• Comments from BoE’s Breeden are due later today (13:45 London), although she will appear on a panel focused on macroprudential matters, which will likely limit the scope for broader monetary policy discussions.