STIR: BLOCK, Midcurve Put Spd

The 2Y UK bond yield has fallen as much as 25.2bp today following commentary by key BoE officials that has left a 50bp or 75bp hike next week "on a knife edge".

• That has cratered BoE pricing - while the September decision remains a close call, further out the strip we've seen more dramatic moves: June 2023 implied was 4.45% this morning, but It has dropped as far as 4.10%.
• Today's 2Y yield drop is being compared to the 25bp drop by the close on June 24, 2016 (post Brexit referendum). Before that you'd have to go to Feb 2009 for a bigger drop (just under 30bp).
• 2Y yields are now off 30bp from the post-2008 high set yesterday. To put this into perspective though, 2Y yields are still up 78bp vs a month ago, and traded with a 1-handle as recently as August 11th.
• And put into the context of broader short-end volatility (August saw two 20+bp daily moves) , today's drop looks more of a retracement after a sharp move higher than a fundamental change of direction.

Answering her first PMQs session in the Commons, Prime Minister Liz Truss confirms that she is not in favour of a windfall tax on excess profits from energy firms.

• Also confirms that she will deliver a statement to the House tomorrow on her government's plans for assisting with energy prices.
• No set timing, but prime ministerial statements are usually delivered at 1230BST (0730ET, 1330CET) or 1530BST (1030ET, 1630CET).
• Compared to more free-wheeling PMQs with PM Boris Johnson in place, Truss takes a much more ideological line on supporting free-market economics.
• Livestream: https://www.parliamentlive.tv/Event/Index/766f21ee...