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GILTS: Little Changed, PMIs Add To Stagflationary Fears

GILTS
CEEMEABulletUKMarketsFixed Income Bullets

Gilts stick within the ranges established earlier in the week.

  • Yields ~1bp higher across the curve, 2.5-4.0bp off the session lows that came in the wake of the soft French services PMI, with the German PMIs countering that rally.
  • Domestic PMIs had little market impact, even as they underscored stagflationary worry.
  • The UK PMIs noted demand weakness, while highlighting employment and input cost increases being passed through to output prices.
  • The surveys also warned that firms indicated a further steep decline in staffing numbers, largely in response to the higher payroll costs and weak demand.
  • This will make for difficult reading for the BoE MPC, especially with an increasing number of Committee members already appearing to be more attuned to growth concerns as the primary downside economic risk.
  • The next 25bp BoE cut is still fully discounted though the June MPC, with ~48.5bp of easing showing through year-end.
  • Macro and cross-market cues eyed ahead of the weekend.

BoE Meeting

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Gilts stick within the ranges established earlier in the week.

  • Yields ~1bp higher across the curve, 2.5-4.0bp off the session lows that came in the wake of the soft French services PMI, with the German PMIs countering that rally.
  • Domestic PMIs had little market impact, even as they underscored stagflationary worry.
  • The UK PMIs noted demand weakness, while highlighting employment and input cost increases being passed through to output prices.
  • The surveys also warned that firms indicated a further steep decline in staffing numbers, largely in response to the higher payroll costs and weak demand.
  • This will make for difficult reading for the BoE MPC, especially with an increasing number of Committee members already appearing to be more attuned to growth concerns as the primary downside economic risk.
  • The next 25bp BoE cut is still fully discounted though the June MPC, with ~48.5bp of easing showing through year-end.
  • Macro and cross-market cues eyed ahead of the weekend.

BoE Meeting

Keep reading...Show less