Inflation - GBP
A more hawkish than expected FOMC dot plot essentially sent all major asset classes lower with TIPS/BEs far from unscathed today.
RPI and supply news hit the inflation curve today. Nominals bull-flattened.
A much stronger-than-expected May PPI print gave another point to Team Reflationista. BEs bull flattened as better TIPS/BE selling abated.
Yesterday’s CPI sugar high for the U.S. inflation asset class didn’t last too as real money sellers knocked BEs lower today.
Today’s stronger-than-expected May CPI print woke BEs up from a six-day narrowing spell but selling pressure still remained in the background.
Gilts ended with a solid underperformance as 10y yields rose 2.5ps after a session lacking rhyme or reason. And strategists look for a UK bounce.
BEs remained hellbent on limping into tomorrow’s CPI print as continued end-user selling/profit taking persisted.
Traders report that the 2071 is doing badly and contend that 5y spreads remain rich.
Risk sentiment recovered from an early hacking scare but BEs didn’t come along for the ride amid more end-user TIPS/BE sales.
The unloved 2071 arrived with the ultralong end underperforming shorter on the curve, and against linkers. Cable basis fell again. Gilt ASW richened.