Hawks Are Circling, BoE Hikes, ECB Ups Inflation Forecast

Tsys trading mostly higher (30Y-ultra weaker amid decent steepener flow since Wed's FOMC), near top end session range -- a stark contrast from session lows after the BoE and ECB policy annc's.

• Yield curves steepened but were off highs as long end partially recovered from post BoE/ECB policy selling. Fading the move, trading desks report central bank selling in 2s-3s and couple waves of buying in 30s, foreign real money selling 5s. Large steepener Blocks (5s and 10s vs. 30Y Ultra) since late Wednesday setting the tone after months of flattening.
• Misc acct buying in 2s-10s during early London trade evaporated on BoE rate hike to .25 followed by additional selling on ECB annc (steady, raises APP pace). Trading desks noted fast$, bank and dealer acct selling in long end initially, prop selling 10s, flattener unwinds (5s and 10s vs 30s).
• Aside the 2x taper acceleration, Chair Powell said rate liftoff could start after Mar22 (if warranted, etc), the FOMC shifted dot-plot to three hikes in 2022 and 2023. Forward guidance siphoned more aggressive rate hike pricing out of Eurodollar futures w/ Reds-Blues +0.080-0.120. Inversion of EDZ4 vs. futures out to EDM6 has waned as policy shock/error is quickly receding. EDZ4 (98.375) remains inverted through EDU5 (98.38).
• The 2-Yr yield is down 4.2bps at 0.6209%, 5-Yr is down 7.3bps at 1.1718%, 10-Yr is down 3.9bps at 1.4173%, and 30-Yr is down 0.3bps at 1.8565%.