It really is difficult to overstate the case when it comes to describing the dramatic character of the repricing in advanced economy front-end rates, and particularly Big 3 central bank expectations.

I spent a lot of time on this Thursday and Friday, but it bears repeating and re-emphasizing because, as one astute commenter noted, the moves in STIRs since the onset of the war “have been brutal.”

On the eve of “Operation Epic Fury,” which is to say when Ali Khamenei was still among the living, the market was still priced for a modest DM easing impulse over the course of 2026.

Specifically, traders had penciled in roughly 125bps of cuts by year-end between the Fed, the BoE, the ECB and the Bank of Canada. So five cuts, at least two of which were attributed to a Kevin Warsh Fed.

Fast forward three weeks and that pricing’s upside-down, and then some. The figure below, from BMO’s Ian Lyngen, is astounding even as it might not present, to the untrained eye, as alarming.

As indicated, the dashed lines are pre-war pricing. The solid lines are pricing as of Friday afternoon.

Take a moment to marvel at the reversal in BoE pricing, where this “flip” is most acute. Pre-war, UK STIRs had penciled in two cuts from Andrew Bailey and co. Now, that pricing reflects nearly four hikes.

Not to put too fine a point on it, but if you skipped my BoE coverage this week, you need to go back and read it. Because as Nomura’s Charlie McElligott put it, “gilts are really ugly and having a global impact.”

“Monetary policy expectations for major global central banks have shifted dramatically in the hawkish direction since the beginning of the war,” Lyngen wrote, editorializing around his chart and noting, as I did late Friday, that because the BoE, ECB and BoC operate on a single mandate, “it follows intuitively that the reaction functions of these banks will differ from that of the Fed.”

Still, the Fed can’t completely ignore the energy shock in the interest of safeguarding employment. As Colby Smith reminded Jerome Powell on Wednesday, the fact that inflation in the US spent half a decade above 2% should give the Fed pause. “Standard learning,” as Powell put it, says monetary policymakers should look through supply shocks, but the longer inflation stays elevated, the higher the risk of unmoored expectations.

“[Chris] Waller is ‘hawking’ in the same direction of Chair Powell’s commentary on the unpleasant potential for the Iran conflict to bleed-through into core inflation,” McElligott went on, in the same note cited above. “We even saw ‘dovish party-line’ Bowman… deviat[e] from her regular signaling of labor market stress justifying” multiple cuts by year-end.

“[T]he weight of the employment side of the Fed’s dual mandate will temper, but not fully offset, the extent of the hawkish repricing to the oil shock in the US,” Lyngen added.

The bottom line — and this brings us full circle to my point about it being impossible to overstate the case on the drama unfolding at the front-end — is that, as Charlie wrote, “the market’s prior implied distribution of outcomes” has been “rage-flipped.”