BoE in Focus, Risk-Reward Still Favours Receiving September MPC

Research evidence excerpt

BoE in Focus, Risk-Reward Still Favours Receiving September MPC

Idea

July 24, 2026 02:52 PM GMT

Morgan Stanley & Co. International plc+MUK Rates Strategy | Europe Fabio Bassanin, CFA

Strategist

BoE in Focus, Risk-Reward Still Fabio.Bassanin@morganstanley.comLuca Salford +44 20 7425-1869

Luca.Salford@morganstanley.com +44 20 7677-1337

Favours Receiving September

MPC

Duration across the board remains highly correlated with energy

prices, with the latest geopolitical developments driving a sell-

off. We retain bullish front-end exposure, hedge geopolitical risk

via long 5y breakevens and remain long 10y ASW.

Key Takeaways

The past week has proved particularly challenging for duration as energy prices

rose further, with the market now pricing around three cumulative BoE hikes.

The focus now shifts to the July MPC. We expect the BoE to retain near-term

policy optionality; we still favour receiving September MPC.

On the curve, front-end repricing has driven a flatter correction. We were

stopped out of our 5y5y/10y5y steepener and turned neutral.

We also note that long-end forwards have remained well behaved despite the

political news flow, while the back-end slope is consistent with front-end rates.

On spreads, a material long-end cheapening drove the curve flatter. The move

was likely driven by technical factors; we still favour being long the 10y sector.

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