Early Richening Moves Extend On BoE DMP, 2 Further BoE Hikes No Longer Fully Priced

Initial BoE DMP reaction saw gilts extend their early rally and BoE-dated OIS soften further, although the moves have faded from extremes.

• The market reaction is best explained by noting the mixed releases within the DMP survey, as expected wage growth and expected price growth both fall - but realised wage growth picked up a little further. Overall this will probably be an encouraging report for the MPC, but in our view won't be enough to stop a September hike, and definitely keeps a November move on the table, too.
• Gilt futures have regained the 94 handle and operate through yesterday’s high, with initial resistance located at Tuesday’s high (94.55).
• Cash benchmarks sit 4.5-7.0bp richer as the curve bull steepens.
• SONIA futures are now 0.25-10.5bp firmer through the blues, with the reds leading the bid.
• BoE-dated OIS prints 1-8bp softer on the session, with ~21bp of tightening showing for this month’s MPC, while terminal policy rate pricing moves below 5.75% i.e. 2x 25bp hikes from current policy rate levels are no longer fully priced.