Yesterday's Hawkish BoE Pricing Adjustment Sticks, Although Extremes Not Breached

The cheapening in core global FI markets and reiteration of hawkish comments delivered by BoE chief economist Pill (covered earlier) helps bias BoE-dated OIS move in a hawkish direction once again today.

• Still, the liquid contracts have not pushed beyond yesterday’s PMI-inspired hawkish extremes, last printing little changed to ~3.5bp firmer on the day, also a little shy of the most hawkish levels seen thus far on Friday, with bonds off session lows.
• That leaves terminal policy rate pricing ~7.5bp above prevailing effective SONIA levels. Beyond there, the first full 25bp cut is priced come the end of the September MPC, with a cumulative 50bp of cuts priced through ‘’24 on the whole (vs. prevailing effective SONIA levels).
• As we have previously flagged, this is some way off the dovish extremes registered last week, when we saw participants toying with the idea of a May ’24 cut and over 85bp of cumulative cuts priced through ’24 on the whole.
• The impact of yesterday’s PMIs, coupled with potential inflationary impulses from already delivered/potential pipeline fiscal stimulus and wider moves in core global FI markets, have been at the fore when it comes to the hawkish readjustment seen in recent sessions.