SONIA Trading Off Wider FI Cues, Multi-Week Ranges Intact

The early afternoon rally in core global FI saw a slight dovish extension in SONIA markets, before U.S. JOLTS data countered.

• The space doesn’t get anywhere near breaking recent multi-week ranges, given adjustments off post-BoE dovish extremes.
• BoE-dated OIS shows ~14bp of cuts for Aug and ~43bp through year end.
• SONIA futures are flat to +4.5.
• UK-centric discussions have generally focused on the size of the seemingly likely Labour majority and margin of error in the opinion polls, as participants look for a change in power in Westminster later this week.
• Relative cross-market vol. in gilts and GBP FX pairs remained contained.
• This points to a lack of worry surrounding a change in political power in the UK, at least at this stage.
• This comes after a volatile few years for UK policymaking, headlined by the COVID pandemic and Truss mini Budget, as well the initial adjustments to Brexit.