Money markets are paring back their bets for central bank tightening in 2022. The BoE is now seen lifting rates by a further 107 bps versus 128 bps on Monday. The ECB is now seen lifting rates just 20 bps versus 25 bps earlier in the day.
European bond markets are reflecting the change in sentiment. 2-year German yields are down north of 20 bps on Tuesday to back under -0.70% while 2-year UK yields are down around 18 bps to under 0.90%. 10-year German yields are also down about 20 bps to well back below 0.00% while the UK 10-year yield is down about 22 bps to back under 1.20%.
Russia's invasion of Ukraine and the subsequent harsh sanctions enacted on it by the West have sparked fears of economic weakness due to Russian energy and other commodity supply disruptions. This is leading market players to drastically dial back on expectations for central bank tightening in the medium term.