SONIA Futures A Touch Lower, ~44bp Of ’24 BoE Cuts Priced

BoE-dated OIS is little changed, showing ~14bp of cuts for the June meeting and ~44bp of cumulative easing through year end.

• SONIA futures are flat to -3.0 with Bunds below levels seen at yesterday’s SONIA settlement.
• The strip operates on very low volume as the polling booths open across the country.
• Late Wednesday saw a buyer of the SFIQ4 95.15/95.20/95.30/95.35 call condor, with paper paying 1.25 on 32K. SFIU4 last trades at 95.055.
• The final round of opinion polls continued to point to a landslide victory for Labour.
• As a result, it will likely be the size of the Labour majority that dictates the market reaction.
• We have flagged downside risks to both GBP and gilts in the wake of the vote.
• A Labour majority of around 75-130 is probably the most positive outcome for markets - but is already closed to being priced in.
• In this scenario Labour would have a large enough majority to not be held hostage by a small number of hardliner MPs but would also not have such a sizeable majority to encourage Starmer and Reeves to leave the middle ground.
• BoE DMP data is also due today.

Source: MNI - Market News/Bloomberg. 2025 meeting dates are estimated.