Off Early Lows, Curve Bear Flattens A Little Pre-BoE

The gap lower at the open sees gilt futures find support at 96.00 before recovering to the 96.215 area, with the contract last showing -30 or so.

• Feedthrough from the Fed decision dominate early on, although local matters will obviously come back to the fore as the day wears on.
• Cash benchmarks run 3.0-5.5bp as the curve bear flattens, removing a little of yesterday’s post-CPI bull steepening move.
• SONIA futures see fresh pressure around the gilt open, before stabilising. That leaves contracts on the strip running 1.5-8.5bp cheaper, with the reds and greens leading the sell off.
• BoE-dated OIS now shows ~14bp of tightening for today’s event, leaning more towards a hike vs. an unchanged outcome, while terminal policy rate pricing ticks above 5.50% once again.
• This comes after markets leant towards no hike re: today’s meeting on a couple of occasions on Wednesday, while terminal policy rate pricing showed below 5.50% (meaning that a 25bp hike was not fully discounted).