/SWAPS: CORRECT: Mizuho: Long/Receiving Bias & Look To Add Gilt Steepeners On Pullbacks

Mizuho note that “the BoE hiked the policy rate by 25bp to 4.50% (7-2 vote split) as expected. Forward guidance was left unchanged – conditional on data developments. Bailey didn’t provide a great steer on future interest rates either despite revised CPI projections remaining well below target. The forecast updates were in line with what was broadly expected; the UK now looks to avoid recession this year. Our base case and trading view remain unchanged. We continue to expect a pause in June and would only consider another 25bp hike if data deliver upside surprises. We prefer to hold a long/receiving bias in Gilts/SONIA swaps and keep looking to add Gilt curve steepeners on retracements. The April inflation report is expected to show a sharp move lower, which should be enough to convince the BoE to stop hiking. Gilt yields moved lower following the result, further supported from a mild banking-related risk-off.”