Short-dated UK gilts rallied after the Bank of England left rates unchanged and said domestic inflationary pressures are easing. The two-year gilt yield fell 11 bps to 4.34%, the largest one-day drop since June 12. Governor Bailey said he did not want attendees to leave the press conference with the impression the committee is progressively moving toward tightening; gilts extended gains after the remark. Money markets now price about 32 bps of cumulative BoE hikes by year-end, down from roughly

Short-dated UK gilts rallied after the Bank of England left rates unchanged and said domestic inflationary pressures are easing. The two-year gilt yield fell 11 bps to 4.34%, the largest one-day drop since June 12. Governor Bailey said he did not want attendees to leave the press conference with the impression the committee is progressively moving toward tightening; gilts extended gains after the remark. Money markets now price about 32 bps of cumulative BoE hikes by year-end, down from roughly 38 bps before the decision, and the probability of a September hike fell from near 60% to below 40%. Aberdeen Asset Management portfolio manager James Lynch said the threshold for a BoE hike is very high and he expects rates to remain on hold for the rest of the year.