September 26, 2022 06:35 GMT
- There has been a huge repricing in terms of both market pricing and analyst expectations following both the September MPC meeting and the government’s fiscal update (“Growth Plan”). Of the analysts that have explicitly updated or reaffirmed their views following the latter, 12/15 (80%) look for a 75bp hike in November while markets at Friday’s close priced around 89bp. Expectations for the terminal rate among those same analysts saw a median of 4.00%, with 80% of analysts expecting a terminal rate in the 3.50-4.25% range. This is considerably lower than the 5.50% terminal rate markets were pricing.
- We discuss whether the government's fiscal plan is stimulatory enough for market pricing and for a 75bp hike next meeting. We do expect 75bp in November, but think STIR market moved are a bit exacerbated (but not necessarily gilt or GBP moves).
- We still think the BOE should have waited until November to announce active gilt sales to give the market time to digest the new remit and assess market conditions.
- there is a small (but non-negligible chance) that this week’s scheduled green gilt syndication gets postponed again if the gilt market continues to see sharp moves.