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Free AccessBulk Of CPI-Driven Hawkish Move Holds
The bulk of the hawkish repricing that came on the firmer-than-expected UK CPI data has held.
- The sticky services components will promote some concern at the BoE, even when any Easter effects are adjusted for.
- Futures recovered from lows of 96.83, operating either side of 97.00 in the time since.
- Note that key support at the May 14 low (97.23) has given way, with any fresh extension lower set to expose the May 3 low (96.43). The latter protects the April 25 low and bear trigger (95.36).
- Gilt yields are 7-12bp higher across the curve, bear flattening. Both 2s10s and 5s30s registered fresh multi-week lows following this morning’s data.
- The data-driven concession ahead of today’s 5-Year auction proved enough to generate solid demand metrics as GBP4.0bn of 4.125% Jul-29 supply was easily digested.
- SONIA futures are 0.25 to 15.0 lower, holding the bulk of the initial CPI-driven move.
- BoE-dated OIS shows 9-15bp firmer across ’24 contracts, with a mere 2bp of easing now priced through next month’s meeting (~11bp was showing late yesterday), 11bp of cuts showing through August (that was close to fully discounting a 25bp cut at yesterday’s close) and ~39bp of easing showing through year end (vs. ~53bp at yesterday’s close)
- Comments from BoE’s Breeden are due later today (13:45 London), although she will appear on a panel focused on macroprudential matters, which will likely limit the scope for broader monetary policy discussions.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
Jun-24 | 5.180 | -2.0 |
Aug-24 | 5.089 | -11.1 |
Sep-24 | 5.010 | -19.0 |
Nov-24 | 4.899 | -30.1 |
Dec-24 | 4.812 | -38.8 |
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.