GILTS: /STIR: Initial Hawkish Reaction To BoE Quickly Reverses

Initial hawkish market reaction to the BoE leaving rates unchanged quickly reverses.

• The vote was 5-4 (hold/cut), with Governor Bailey (the key swing voter) voting for no change.
• Initial hawkish move triggered by the decision to leave rates on hold (5-6bp of easing was priced heading into the event), with the subsequent dovish reaction aided by BoE Governor Bailey’s views in the minutes (detailed in a recent bullet) and the wider statement pointing to a lower risk of greater inflation persistence alongside increased risk of weaker demand.
• Gilt futures trade to fresh session highs of 93.46 after initially weakening to 93.03. Last +19 at 93.33.
• Initial support and resistance remain untouched (92.91 & 93.98).
• Yields 1.5-3bp lower, curve bull steepens.
• 2s10s further away from uptrend support drawn off the September ’24 low.
• SONIA futures -2.75 to +5.5, after initially trading hawkishly.
• 16bp of cuts still priced for the December meeting, with the next cut more than fully discounted through February (32bp).