###/ SONIA: The front end of the SONIA curve....>

BOE: ###/ SONIA: The front end of the SONIA curve has bear steepened since close

of business on Friday and this has seen MNI PINCH calculate a higher probability

of the Bank of England rising interest rates this year and next.

- MNI PINCH now see market pricing in a 10% chance of a rate hike on Thursday

and a 46% chance of a 25bp rate hike in November, up from 6% and 39% seen on

Friday respectively. While in 2018, markets seen pricing in a 75% chance of a

hike in Feb, up from 61% and price in a full 25bp hike in Aug vs 86% at the end

of last week. Most investment banks expect BoE to leave rates on hold in a 6-2

vote on Thursday with only a few seeing a 5-3 vote.

- POV: The rate for Feb 2018 BoE forward dated SONIA is currently seen at

39.1bps nearly 7bp higher than after Jun 15 BoE MPC decision that saw 5-3 vote

to leave rates unchanged. Comments from BoE internal MPC member Haldane have

been more hawkish of late, however, UK flash Q2 GDP was lower than BoE forecasts

and CPI surprised to the downside in June, while price pressure in latest UK

manufacturing PMI continued to ease in July indicating pass through from sharp

fall in GBP is fading.