March 22, 2023 09:43 GMT
UK inflation the big driver ahead of the Fed
- Gilts have been the big movers this morning, with the curve bear flattening following the higher-than-expected inflation print this morning. We are particularly focused on the jump in services inflation which rose from 5.2%Y/Y in January to 5.6%Y/Y in the February data. The MNI Markets team think that this will be enough to push the MPC to hiking 25bp tomorrow (which is now pricing around 23bp up from 14bp at yesterday's close). The terminal rate has shifted higher too and 2-year gilt yields were as much as 21bp higher earlier this morning but at writing are around 17bp higher on the day.
- Bunds and Treasuries were also pulled around by UK inflation data this morning, both on the release of the data and the gilt open. Both curves have flattened but Treasuries are a little higher ahead of the FOMC meeting later today.
- TY1 futures are up 0-6 today at 114-010 with 10y UST yields down -2.2bp at 3.590% and 2y yields down -3.4bp at 4.136%.
- Bund futures are down -0.33 today at 135.69 with 10y Bund yields up 2.3bp at 2.311% and Schatz yields up 3.4bp at 2.636%.
- Gilt futures are down -0.89 today at 103.96 with 10y yields up 8.5bp at 3.449% and 2y yields up 16.6bp at 3.429%.