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Yields up around 2bp across the curve following Pill opening remarks

GILTS
  • Gilt futures move from around 98.18 to hit a low of 98.01 on the back of the Pill speech - with no explicit signal for an August cut here. We don't think that this speech rules anything in or out (although we will be watching the Q&A with interest) but there had been a number of market participants who had thought that if the Bank is to cut on 1 August we would need a signal from an internal MPC member beforehand. The only other MPC member still in the schedule is Mann (who is an external member and a known hawk) so unless there is an unscheduled media interview, or any comments after next week's data (just ahead of the blackout period begins) we remain in the dark as to whether the Bank will cut next month or not.
  • August is now pricing around 48% probability of a cut - from around 60% pre-speech, with year-end still pricing around 46bp, only around 2.5bp less than pre-speech.
  • Not much of a curve move in gilt - with yields up around 2bp for both 2-year and 10-year gilts.
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  • Gilt futures move from around 98.18 to hit a low of 98.01 on the back of the Pill speech - with no explicit signal for an August cut here. We don't think that this speech rules anything in or out (although we will be watching the Q&A with interest) but there had been a number of market participants who had thought that if the Bank is to cut on 1 August we would need a signal from an internal MPC member beforehand. The only other MPC member still in the schedule is Mann (who is an external member and a known hawk) so unless there is an unscheduled media interview, or any comments after next week's data (just ahead of the blackout period begins) we remain in the dark as to whether the Bank will cut next month or not.
  • August is now pricing around 48% probability of a cut - from around 60% pre-speech, with year-end still pricing around 46bp, only around 2.5bp less than pre-speech.
  • Not much of a curve move in gilt - with yields up around 2bp for both 2-year and 10-year gilts.