SONIA and Euribor comfortably through yesterday's lows

STIR futures have remained under pressure this morning following the higher than expected US CPI print yesterday. While the Eurodollar curve is generally still holding in above yesterday's lows, the SONIA and Euribor curves have breached yesterday's lows (i.e. highs in yields).

• SONIA futures have seen the biggest move in the Dec-22 contract which is down 14.5 ticks on the day at writing, a total of a 28 tick move lower since Tuesday's close. Whites and Reds are all down by a double digit amount while the curve has flattened through the Greens and Blues have only moved up to 3.5 ticks since Tuesday's close. The curve remains inverted after the Mar-23 contract. Markets are now more than fully pricing a 50bp hike at the August MPC meeting (52bp priced at writing) with further 50bp hikes fully priced for September and November and a 25bp hike priced for December (175bp cumulatively by year-end). This would leave Bank Rate at 3.00% and no further hikes are fully priced at this stage.
• The Dec-22 contract has also been the biggest mover on the Euribor strip. It is down 10 ticks on the day and 26 ticks since Tuesday's close. There remains no inversion in the Euribor curve. Markets now price 35bp for next week's ECB meeting, 95bp cumulatively by the September meeting and 165bp by year-end.