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Political uncertainty weighs; lower Fed terminal rate sees partial reversal

GILTS
  • Political uncertainty has led to the SONIA strip moving up to 20 ticks lower today (the moves had been above 25 ticks earlier) with a steepening throughout the Whites. Markets have now pushed the terminal rate back to around 5.25% from being close to 5.00% yesterday.
  • Gilts have recovered off their lows, helped higher by Treasuries after a WSJ Nick Timaraos piece suggesting the Fed could slow the pace of hikes to 50bp from December. However, yields for short/medium-dated gilts remain at least 11bp higher on the day.
  • The 10s30s curve has further flattened today and is now inverted by around 2bp at writing.

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