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MNI EUROPEAN MARKETS ANALYSIS: Curve Flattening Continues Post-Fed

  • Continued curve flattening was the dominant theme for global FI markets post-Fed
  • The yen was volatile after the BoJ kept its ultra-loose monetary policy settings and dovish forward guidance unchanged. Spot USD/JPY took out the Y145.00 mark on its way to a new multi-decade high of Y145.37, which was followed by a sharp reversal. This raised questions on whether the sharp pullback was driven by an FX intervention or profit taking amid heightened intervention risk. Japan's FX czar Kanda later clarified that the authorities have not stepped in yet, but could conduct a stealth intervention.
  • A marathon of central bank meetings takes centre stage today. Data highlights include U.S. current account balance & jobless claims, while the speaker slate features ECB's Schnabel, BoE's Tenreyro, as well as Riksbank's Floden & Ohlsson.

MNI BOE Preview - September 2022: Will QT be delayed?


  • The MNI Markets team thinks that with growth already starting to show some signs of slowing and with Bank Rate getting back to neutral (and potentially in the eyes of some additional MPC members into restrictive territory) that the limitation to upside inflation expectations from the energy price support scheme will be enough to sway the majority of MPC members to vote for a 50bp hike rather than a 75bp hike. We also think the “forceful” language will be maintained at least until the new November MPR forecasts.
  • However, this is far from a foregone conclusion and since the August MPC meeting we have only heard from four MPC members.
  • The MNI Markets team is concerned that the risks of a delay or alteration to the plan for active gilt sales is much higher than the market anticipates. We discuss this and the Bank of England's options if it decides not to confirm the beginning of active gilt sales this week.
  • For the full document including summaries of over 20 sell side view see:MNI BoE Preview - Sep22.pdf