Spill Over From ECB Commentary Provides Dovish Impulse For SONIA

The post-Schnabel firming in Bunds & the European short end lends support to SONIA futures at today’s open, with the latter running flat to +7.0 as the reds lead the bid.

• BoE-dated OIS moves lower in tandem, with contracts through ’24 showing little changed to ~8bp lower on the day.
• BoE-dated OIS now shows ~22.5bp (90% odds of a 25bp cut) through the June ’24 MPC, with the first 25bp cut still more than fully discounted come the end of the August MPC. ~76bp of cumulative cuts are now priced through ’24.
• Overnight, we saw the Citi/YouGov inflation expectations survey reveal no movement in the year ahead print (4.2%), although the longer run expectations release moved up to 3.5% from 3.3% in the month prior.
• That is the sort of movement in longer term inflation exp. that will keep the BoE on guard.
• Final services and composite PMI data headlines the domestic docket today.