Money market pare tightening bets: ECB and BoE both seen lifting rates less this year versus on Monday

Money markets are paring their bets for central bank tightening in 2022. The BoE is now seen lifting rates by a further 107bps versus 128bps on Monday. The ECB is now seen lifting rates just 20bps versus 25bps earlier in the day.

European bond markets reflect such sentiment. 2-year German yields are down north of 20bps on Tuesday to back under -0.70% while 2-year UK yields are down around 18bps to under 0.90%. 10-year German yields are also down about 20bps to well back below 0.00% while the UK 10-year yield is down about 22bps 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 as a result of fears of 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.