SONIA Twist Flattens At Margin As Bond Rally Competes With Bailey Reiterations

SONIA futures are 2bp lower to 2bp firmer through the blues as a post-20-Year Tsy & JGB supply rally in core global FI markets provides support further out the strip.

• Meanwhile, fairly familiar comments from BoE Governor Bailey, which crossed after the SONIA close, applies modest pressure to the front end of the strip.
• Bailey flagged upside risks to inflation re: food prices and energy. He also touched on the still tight labour market producing elevated wage outcomes and services inflation that is much too high. He underscored the idea that it is much too early to think about rate cuts, while highlighting vigilance when it came to looking for signs re: persistent inflation, stressing that any risks to the inflation outlook may trigger further tightening.
• Liquid BoE-dated OIS contracts sit within 1bp of yesterday’s closing levels, little changed to a touch firmer on the day.
• Bailey will head up a group of MPC members testifying in front of the Treasury Select Committee later this morning.
• That provides the focal point of today’s domestic docket, while fiscal speculation is set to continue ahead of tomorrow’s Autumn Statement.