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Outperforming Bunds, underperforming USTs

GILTS
  • 10-year gilts have outperformed Bunds but underperformed USTs today, while 2-year gilt yields have moved higher ahead of tomorrow's BOE meeting (but by less so than 2-year UST yields have moved ahead of the Fed).
  • The SONIA curve has moved less than either the Eurodollar or Euribor curves this morning, with little in the way of domestic UK news.
  • Markets continue to price in around 30bp for tomorrow's meeting (so 25bp fully priced with around a 20% probability of 50bp). There continues to bejust under 100bp priced by August (3 meetings) and 150bp by November (5 meetings) with just under 175bp priced by February 2023 (7 meetings).
  • We still think that the risks are skewed to a more dovish BOE tomorrow, and note that if the "coming months" time contingency is removed from the forward guidance, the market would view this dovishly.
  • Levels ahead of the ISM (the major US data release of the day):
  • 2y yields down -5.2bp today at 1.351%
  • 5y yields down -3.8bp today at 1.419%
  • 10y yields down -3.1bp today at 1.676%
  • 30y yields down -1.8bp today at 1.903%
  • 2s10s up 2.0bp today at 32.4bp
  • 10s30s up 1.3bp today at 22.7bp

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