Continuing yesterday's momentum

STIR markets are seeing more of the move from late in yesterday's session continue (albeit at a much smaller magnitude): SONIA futures are up marginally while Eurodollar / Euribor sutures are a little lower.

• SONIA futures remain some way off their intraday lows of yesterday with Reds generally 18.5 ticks higher than yesterday's intraday low (but after the weak start to the week they are only around 2.5 ticks higher on Friday's close. Bailey's comments highlighted uncertainty and noted that's why the MPC changed its forward guidance at its meeting earlier this month. Despite his comments, markets continue to price in 32bp for the May meeting and 57bp cumulatively by the June meeting. Given the commentary, unless there is a major change in events in Eastern Europe, we think 50bp in May looks much less likely than the 25% or so probability assigned by the market. 135bp remains priced in by year end (with 6 meetings around 5.4 25bp hikes are fully priced).
• Eurodollar futures have seen the biggest move in the Greens overnight, down 3.5 ticks. Markets continue to price around 45bp for the May meeting, 127bp by July (3 meetings) and 212bp by year-end (in addition to the 25bp hike already delivered).
• Euribor futures 1-2 ticks lower this morning. 27bp priced for September (that is fluctuating around the 25bp mark and not really moving much) with 58bp now priced by December (up around 10bp on the middle of last week).