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UK/German 2-Year Spread Hovers Around Tightest Since May ’23, BoE’s Pill Eyed Wednesday

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Yesterday saw the UK/German 2-Year yield spread register its tightest close since May ’23, just below 122bp.

  • The May 16 ’23 closing level (~115bp) presents the next point of downside interest.
  • Comments from BoE’s Pill and Mann are due tomorrow.
  • Chief economist Pill is typically hawkish, but the tone of the minutes accompanying the most recent BoE decision increases the possibility of a dovish tilt tomorrow.
  • It is worth bearing in mind that a more aggressive round of BoE rate cuts is already priced through June ’25, when compared to the ECB equivalent; ~90bp for the BoE vs. ~80bp for the ECB, discounting the already delivered 25bp ECB cut.

Fig. 1: UK/German 2-Year Yield Spread

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Yesterday saw the UK/German 2-Year yield spread register its tightest close since May ’23, just below 122bp.

  • The May 16 ’23 closing level (~115bp) presents the next point of downside interest.
  • Comments from BoE’s Pill and Mann are due tomorrow.
  • Chief economist Pill is typically hawkish, but the tone of the minutes accompanying the most recent BoE decision increases the possibility of a dovish tilt tomorrow.
  • It is worth bearing in mind that a more aggressive round of BoE rate cuts is already priced through June ’25, when compared to the ECB equivalent; ~90bp for the BoE vs. ~80bp for the ECB, discounting the already delivered 25bp ECB cut.

Fig. 1: UK/German 2-Year Yield Spread

Keep reading...Show less