SNB throws a curveball and Bobl yields move more than 20bp higher

This morning's session was supposed to see us digest yesterday's ECB fragmentation announcement, the Fed's 75bp hike and look ahead to the UK MPC decision. However, markets have instead been thrown a curve ball by another central bank, the SNB, which unexpectedly hiked 50bp this morning and caused a kneejerk move lower in Euribor and Bund futures.

• Schatz yields are up 16.7bp on the day, Bobl yields up 20.6bp, before the curve then flattens a bit more.
• Peripheral spreads are a little tighter than yesterday's close.
• Looking ahead to the BOE markets are pricing in around a 1/3 probability of a 50bp hike today (but 25bp fully priced). The sell-side consensus unanimously looks for a 25bp hike with none of the 21 previews that we have read looking for more than 3 MPC members voting for 50bp in their base case (although some do acknowledge the risk of a 50bp move today). If we see a 25bp hike today, the focus will be on whether the forward guidance remains in its current form or is altered in any way. Markets are pricing 81bp of hikes by August (cumulatively), 120bp by September (3 meetings) and 160bp by November (4 meetings). Whether the BOE attempts to use its statement to talk down these rate expectations remains to be seen. The market thinks the BOE will be influenced by the more aggressive moves by the Fed (and potentially by the ECB) but we are not sure that MPC members themselves believe that to be the case yet given that the BOE started hiking before many of the others. For the full MNI BOE preview click here.
• TY1 futures are down -0-1+ today at 115-03+ with 10y UST yields up 11.6bp at 3.404% and 2y yields up 13.2bp at 3.327%.
• Bund futures are down -2.23 today at 142.38 with 10y Bund yields up 16.3bp at 1.802% and Schatz yields up 16.8bp at 1.232%.
• Gilt futures are down -0.59 today at 112.10 with 10y yields up 4.5bp at 2.510% and 2y yields down -0.1bp at 1.947%.