CHINA-EU: 4/7-year EUR Bonds Mandate: Transaction Likely Next Week

• BOE Deputy Governor Dave Ramsden is due to speak on a panel at the Single Resolution Mechanism’s 10th Anniversary Conference in Brussels beginning at 9:00BST. There will be no text released but the event is being streamed here.
• The panel is not on monetary policy. It is entitled "Resilience without borders; Lessons and leverage from global cooperation." with the agenda noting that "This panel will explore the international dimension of bank resolution. Discussions will focus on global cooperation and cross-border challenges in the resolution framework."
• We therefore think it would be unlikely (but not impossible) for Ramsden to discuss monetary policy this morning. If he does we would expect him to remain on the dovish side and keep the door open to a cut. His recent comments have shown that he remains concerned about the labour market and he has in the past noted how much attention he pays to wage settlement data when deciding his vote. Yesterday's labour market data showed a notable slowdown in private regular wage growth but showed some upward revisions to recent payroll growth - pointing to a slowing but not disastrous labour market. See our full review here.
• Also note that Governor Bailey (the likely swing voter in Q4) spoke last night and said that "I've been saying for some time that I think we're seeing some softening of
  the labour markets...and that broadly is the story that I pick up. I think we saw it in the numbers this morning." He added: "On the other hand, balancing that off, we've got inflation above  target...so balancing these two things is the thing that we're having to do." He wasn't any more specific in his comments Tuesday on his read of the latest data but we think this shows that he maintains optionality for a Q4 cut.

SFIZ5 96.20/96.30cs 1x2, bought for 0.25 in 2.5k.

{GB} STIR: The dovish repricing in GBP STIRs has pushed the SFIZ5/Z6 spread to the lowest level of ’25.

• The spread has traded as low as -38.0, with the next level of downside interest located at the ’24 low (-40.5).
• The move has been driven by the softer-than-expected UK labour market report and global developments (risk-off global trade disputes, comments from Fed Chair Powell and political developments in France).
• A reminder that BoE Governor Bailey pointed to the trade off in managing inflation and a softening labour market late on Tuesday.
• Still, he steered clear of any guidance when it comes to future interest rate decisions, heightening the impact of next week’s inflation data.
• A dovish CPI report would likely drive further weakness in the spread.
• That is assuming the market would price a deeper cutting cycle, as opposed to just pulling forward rate cut expectations
• BoE-dated OIS currently prices 10bp of easing through year-end vs. the 4-5bp level that became the norm in recent weeks.
• SONIA futures-implied terminal rate pricing last 3.45% vs. 3.60% in late September 

Fig. 1: SONIA Dec ‘25/Dec ’26 Futures Spread (SFIZ5/Z6)

Source: MNI - Market News/Bloomberg Finance L.P.