STIR: BoE Pricing Steady Around 50bp Of Cuts Through Year-End
BoE-dated OIS shows 51.5bp of cuts through year-end after printing sub-50bp earlier today.
- Domestic data helped trim BoE rate cut pricing through year-end this week (a little over 55bp of cuts was priced at last Friday's close), although we don’t expect any of the most recent round of the traditional tier 1 datapoints to impact the outcome and vote split at the Bank’s March meeting.
- Meanwhile, the PMIs underscored the stagflation risk evident in the UK at present. This will not make for pleasant reading within the MPC, especially with an increasing number of Committee members already appearing to be more attuned to growth concerns as the primary downside economic risk.
- SONIA futures now -0.25 to +5.5, strip twist flattens.
- Looking ahead, next week’s UK calendar will be headlined by comments from BoE’s Pill, Ramsden, Dhingra & Lombardelli. Their assessments of the recent data releases and ongoing global uncertainty will be closely eyed, although odds of a March cut remain low given the BoE’s preference for gradual easing.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.446 | -0.9 |
May-25 | 4.257 | -19.7 |
Jun-25 | 4.188 | -26.6 |
Aug-25 | 4.058 | -39.7 |
Sep-25 | 4.022 | -43.2 |
Nov-25 | 3.956 | -49.8 |
Dec-25 | 3.939 | -51.5 |
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NOK: O/N NOKSEK Vols Relatively Subdued Ahead Of Norges Bank Decision
Norges Bank is unanimously expected to remain on hold at tomorrow’s meeting, while continuing to guide for a rate cut in March. As such, markets are well priced for an uneventful outcome, with overnight ATM NOKSEK vols of 7.5 below prevailing levels ahead of the September, November and December 2024 decisions. An overnight NOKSEK straddle would thus require just a 30 pip (~0.3%) swing to breakeven.
- On the downside, key support remains at 0.9717 (Jan 2 low). Clearance of this level would undermine the corrective rally which began at the start of this year and expose trendline support drawn from the August 2024 low at 0.9667.
- The Jan 15 high at 0.9859 represents initial resistance, coinciding with the 61.8% retracement of the Nov 22nd – Dec 20th bear leg.
- We view the risks to tomorrow’s decision as slightly tilted in a hawkish direction, with the weak exchange rate, higher commodity prices and increases in global implied policy rates all hawkish inputs into Norges Bank’s framework.
- One area of interest amongst analysts ahead of the decision is whether the weak exchange rate will return to having a prominent role in the policy statement’s risk assessment.
- MNI’s preview of the decision is here.
EGB SYNDICATION: Spain 10-year Obli: Priced
- Reoffer price 99.75 to yield 3.18%
- Spread set previously at 3.45% Oct-34 Obli (mid) +5bp
- Guidance was +8bp area then revised to +6bp area (+/1bp WPIR)
- Size: E15bln (MNI had expected E10-15bln)
- Books in excess of E155bln
- Maturity: 30 April 2035
- Coupon: 3.15%, Short first
- ISIN: ES0000012O67
- Settlement: 29 January 2025 (T+5)
- Bookrunners: BBVA, CACIB, DB (B&D/DM), JPM, MS, SANTANDER
- Timing: FTT Immediately
From market source / BBG
SONIA: Large Call Fly
SFIZ5 95.50/96.00/96.50c fly, bought for 12.5 and 12.25 in 15k.
