OUTLOOK: Price Signal Summary - S&P E-Minis Trades Through The 20-Day EMA

SFIU5 96.20/96.30/96.40/96.50c condor, bought for 2 in 10k.

• Looking at neutral rate the February MPR, it pointed to model-based estimates of the neutral rate at 2.25-3.75%.
• As we noted above in our STIR bullet the latest BOE MaPS (Market Participants Survey) has a median estimate of neutral of 3.50% (Mann in particular has been a fan of referencing the MaPS neutral estimate).
• Taylor's estimate today of 2.75-3.00% is therefore on the low side - considerably below the 3.38% terminal rate priced in by markets at present.
• Taylor is due to appear on the panel in Sintra at 11:30BST and he is due to speak again on Friday evening at the LSE on the neutral rate (with text out 16:00BST on Friday). He is expected to set out further details on his estimation for neutral in this speech.
• What will be interesting is whether other MPC speakers discuss their expectations of where neutral is - or whether they stick to the script of "it's hard but we're not there yet".
• Governor Bailey said yesterday when asked on neutral that they make the assessment of whether they think Bank Rate is currently restrictive on a meeting-by-meeting basis.
• When the "restrictive"  part of the guidance changes, markets may well reassess their terminal expectation. This is possible in August, but with so much uncertainty, August may be too soon for other MPC members to make this assessment - even if they do think the neutral rate is higher than Taylor.
• Any pushback from MPC members that neutral is higher and being approached would likely be more market moving than Taylor's comments today, however.

OI data points to net short setting in FV through US futures on Tuesday.

• Modest net long cover was seen in TU futures, while it is hard to make any real inference when it comes to WN positioning, with the price of that contract unchanged on the day come settlement.
• Net short setting provided the dominant positioning impulse on the curve.