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Fed done, BOE next

BONDS
  • Core fixed income is off of its highs this morning but remains above pre-Fed levels. TY1 futures for example were trading around 118-10 going into the decision and hit a high of 119-09+ overnight but now trade around 118-26+ at writing - not far off a 50% retracement of the move higher.
  • The UST curve has bull flattened since yesterday's close (reversing some of yesterday's steepening) while Bund and gilt cash curves had caught up with these moves by steepening.
  • Today the focus will be on the Bank of England. A 25bp hike is unanimously expected by analysts in the 22 previews that we read through, with markets fully pricing 25bp with around a 20% probability of a 50bp hike. The focus will be on the vote split (which could easily be a 3 way split), the forward guidance (will the time contingency of further moderate hikes be "in the coming months"?) and how far below 2% will the inflation forecasts be at market rates in 2/3 years time? There is also expected to be some further commentary on gilt sales. We wouldn't expect an announcement on the timing/pace at this meeting, but we wouldn't rule it out. For the full MNI BOE Preview click here.
  • ECB's Lane is due to speak at 11:30BST / 6:30ET on the EZ economic outlook. After recent comments from other policymarkers discussing the prospects of a July hike, it will be interesting to see if he talks up the prospects today, too.
  • Continued digestion of the Fed meeting alongside weekly US claims and nonfarm productivity data will be watched today, ahead of tomorrow's US employment report.
  • TY1 futures are down -0-10+ today at 118-26+ with 10y UST yields up 1.7bp at 2.954% and 2y yields up 3.0bp at 2.675%.
  • Bund futures are down -0.11 today at 153.07 with 10y Bund yields up 1.8bp at 0.987% and Schatz yields down -1.1bp at 0.253%.
  • Gilt futures are up 0.22 today at 118.05 with 10y yields down -1.2bp at 1.953% and 2y yields down -2.6bp at 1.601%.
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