Some Dovish Flows To Start In UK STIRs

The combination of the uptick in wider core global FI markets since yesterday’s SONIA settlement and the slightly softer-than-expected UK GDP data provides some dovish flows in early Thursday UK STIR trade.

• That leaves SONIA futures flat to 8.0bp firmer.
• Meanwhile, BoE-dated OIS shows 79bp of cuts through ’24, ~20bp off the post-U.S. CPI extremes registered on Tuesday.
• Markets currently price roughly 2/3 odds of a 25bp cut come the end of the June '24 MPC.
• A 25bp cut is more than fully discounted through the end of the August '24 MPC.
• The hawkish shift seen on the back of the U.S. CPI data has been fully reversed.
• UK political matters remain front and centre, with by-elections in Wellingborough and Kingswood set to dominate local headline flow today.
• Elsewhere, FT sources have suggested that Chancellor Hunt “is considering slashing billions of pounds from public spending plans to fund pre-election tax cuts if he is penned in by tight finances in his March 6 Budget.”
• BoE speak from Mann & Greene will cross this afternoon.