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/STIR: Goldman: BoE To Clarify Reaction Function, Continue To Prefer Long 30s Vs. U.S.

GILTS
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Ahead of this week’s BoE meeting, Goldman Sachs expect “the market to focus on the conviction of the core of the MPC on how secure the underlying trend disinflation is.”

  • “Disagreement among the MPC on the degree of inflation progress has made it more difficult for UK yields to fall.”
  • “The vote split may not reveal fresh insights on that dimension, although if Deputy Governor Ramsden were to change his vote to a cut, it would be a dovish signal for current market pricing.”
  • “We also think the new inflation projections are likely to show more confidence that inflation is sustainably coming down beyond H1.”
  • “Though our economists expect the first cut to occur in June we do not think the MPC needs to send an explicit signal on Thursday, especially as current guidance already says the Bank rate is under review.”
  • “In any case, we continue to prefer divergence trades in U.S. vs UK and think that view is best expressed at the long-end of the curve – stay long 30y Gilts against U.S. Tsys.”
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Ahead of this week’s BoE meeting, Goldman Sachs expect “the market to focus on the conviction of the core of the MPC on how secure the underlying trend disinflation is.”

  • “Disagreement among the MPC on the degree of inflation progress has made it more difficult for UK yields to fall.”
  • “The vote split may not reveal fresh insights on that dimension, although if Deputy Governor Ramsden were to change his vote to a cut, it would be a dovish signal for current market pricing.”
  • “We also think the new inflation projections are likely to show more confidence that inflation is sustainably coming down beyond H1.”
  • “Though our economists expect the first cut to occur in June we do not think the MPC needs to send an explicit signal on Thursday, especially as current guidance already says the Bank rate is under review.”
  • “In any case, we continue to prefer divergence trades in U.S. vs UK and think that view is best expressed at the long-end of the curve – stay long 30y Gilts against U.S. Tsys.”