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Initial BoE-Inspired Downtick Countered As Gilts Firm On Econ Worry & Lack Of BoE Guidance


Gilts remain the outperformer in core global FI, even after the BoE delivered a 50bp rate hike, which was more hawkish than the 33-34bp of tightening priced into the dated OIS strip ahead of the decision, while the none of those surveyed by BBG had a 50bp hike as their official baseline view.

  • The initial reaction saw a move to fresh lows and a look below yesterday’s base for Gilt futures, before a bounce, presumably on the lack of meaningful guidance re: future policy and stagflation-/recession-based worry.
  • That move saw Gilt futures to fresh session highs, on a move through yesterday’s peak, last trading +70 or so, while cash Gilts are 2-10bp richer across the curve, which bull flattens allowing the 2-/10-Year yield curve to print fresh inverted cycle extremes.
  • BoE-dated OIS spike higher, before retracing from hawkish extremes to leave terminal rate pricing ~8bp above pre-announcement levels, showing just above the 6.10% mark in policy rate terms.
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