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Week Ahead (1/3)

UK
  • Another week, another rollercoaster in markets. On the week, the Dec-22 SONIA futures contract moved 15.5 ticks lower as the market looked for an even more aggressive pace of near-term tightening following stronger-than-expected UK activity growth for May and another higher-than-expected US inflation print.
  • However, the terminal rate barely changed and the sell-off in SONIA futures was very much contained to the very front of the curve. Even the Mar-23 contract was only 2 ticks lower on the week (and continues to reflect the low of the strip). From the Jun-23 contract the strip remains inverted and moved even higher last week with some Reds up over 10 ticks and Greens / Blues up to 18 ticks higher on the week.
  • In terms of what is now priced in, the June meeting now sees 49bp priced (up from 46bp a week earlier but down from an intraweek high of 56bp). There is a cumulative 101bp priced by September (up from 93bp), 145bp by November (from 134bp), 175bp by December (from 162bp) but there is no further hike fully priced thereafter (although we did spike above 200bp for the March 2023 meeting intraweek).
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