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STIR: Market continues To Favour Cuts At BoE MPR Meetings

STIR
BulletMarketsFixed Income Bullets

The market continues to assign greater odds of rate cuts to BoE meetings that are accompanied by an MPR vs. non-MPR meetings.

  • This makes sense to us at this stage, given the Bank’s reference to careful and gradual easing, alongside clouded policy visibility.
  • The clouded policy visibility and lingering inflation risk means that only ~8bp of easing is priced between the end of the September MPC and year-end (albeit front-loaded into the Nov meeting, which equates for 7 of the 8bp).
  • Note that 50bp of cuts are almost fully priced through September.
  • Extension of the quarterly rate cutting pattern could lead to receiving pressure in the belly of the Sep/Nov/Dec BoE-dated OIS fly, particularly if dovish data and more forthright guidance on BoE rate cuts becomes evident in the coming months (CPI and wage readings continue to dominate BoE thinking)
  • Note that GBP STIR pricing echoes the previously covered bias towards pricing ECB rate cuts at meetings that are accompanied by that central bank’s economic projections.

BoE Meeting

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The market continues to assign greater odds of rate cuts to BoE meetings that are accompanied by an MPR vs. non-MPR meetings.

  • This makes sense to us at this stage, given the Bank’s reference to careful and gradual easing, alongside clouded policy visibility.
  • The clouded policy visibility and lingering inflation risk means that only ~8bp of easing is priced between the end of the September MPC and year-end (albeit front-loaded into the Nov meeting, which equates for 7 of the 8bp).
  • Note that 50bp of cuts are almost fully priced through September.
  • Extension of the quarterly rate cutting pattern could lead to receiving pressure in the belly of the Sep/Nov/Dec BoE-dated OIS fly, particularly if dovish data and more forthright guidance on BoE rate cuts becomes evident in the coming months (CPI and wage readings continue to dominate BoE thinking)
  • Note that GBP STIR pricing echoes the previously covered bias towards pricing ECB rate cuts at meetings that are accompanied by that central bank’s economic projections.

BoE Meeting

Keep reading...Show less