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STIR: Just Over 70bp Of BoE Cuts Priced Through '25

STIR
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The rally in core global FI (driven by questions surrounding U.S. tech dominance following Chinese advances in AI and tariff risks stemming from Trump’s second term) drives a light dovish move in GBP STIRs.

  • BoE-dated OIS prices 71bp of cuts through year-end, with 22.5bp of cuts priced through February, 27bp of cuts priced through March and 42.5bp of easing showing through May. We continue to expect cuts at both the February and May meetings.
  • SONIA futures are flat to +4.0.
  • Last week’s dovish extremes are intact across both markets.
  • Goldman Sachs continue to think the BoE will cut faster than the market expects.
  • They suggest that “there is some upside risk to headline inflation later in the year due to price increases in water bills and private school fees, but the key for the direction of UK rates will be whether this is consistent with ongoing moderation in underlying inflation. We think it will be and that the current level of rates will prove too restrictive for the economy.”
  • Little of note on the UK calendar this week, with next week’s BoE decision providing the next major UK risk event.

BoE Meeting

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The rally in core global FI (driven by questions surrounding U.S. tech dominance following Chinese advances in AI and tariff risks stemming from Trump’s second term) drives a light dovish move in GBP STIRs.

  • BoE-dated OIS prices 71bp of cuts through year-end, with 22.5bp of cuts priced through February, 27bp of cuts priced through March and 42.5bp of easing showing through May. We continue to expect cuts at both the February and May meetings.
  • SONIA futures are flat to +4.0.
  • Last week’s dovish extremes are intact across both markets.
  • Goldman Sachs continue to think the BoE will cut faster than the market expects.
  • They suggest that “there is some upside risk to headline inflation later in the year due to price increases in water bills and private school fees, but the key for the direction of UK rates will be whether this is consistent with ongoing moderation in underlying inflation. We think it will be and that the current level of rates will prove too restrictive for the economy.”
  • Little of note on the UK calendar this week, with next week’s BoE decision providing the next major UK risk event.

BoE Meeting

Keep reading...Show less