STIR: Dovish ECB Pricing Post-PMI Move Holds, Over 50bp Cuts Show Through Dec

April is shaping up as solid for retail sales, with Johnson Redbook Same-Store Retail month-to-date Y/Y sales up 7.0% (the week ending April 19 was +7.4% Y/Y).

• This brings month-to-date retail sales in the series (which captures around 80% of Census Bureau retail sales) above retailers' targeted 6.4% gain.
• If the current rate is sustained for the full month, April Johnson Redbook retail sales would be the strongest Y/Y since December 2022.
• The latest gain is party a calendar effect, however, which may be partially paid back next week as "a later Easter [compared to 2024] contributed to higher sales volume during the week", and "retailers anticipate declining sales volume next week, as most businesses closed for Easter Sunday".
• But anecdotes were generally positive: "the warm weather had a positive impact on the seasonal apparel market... food and consumables also performed well. Additionally, home improvement and outdoor merchandise showed signs of increased demand as the season changes.
• There was also some indication of tariff front-running continuing in the week: "shoppers took the opportunity to stock up on essential items and larger purchases to avoid upcoming tariff hikes."

The SONIA June ‘25/June ’26 (SFIM5/M6) spread is threatening a clean break of the prior cycle low at -60.0bp.

• SFIM5/M6 now presents the most obvious dovish pressure point to us (over a multi-month horizon), with much of the dovish move seen in SFIM5/M6 since late March explained by the move in SFIM5/Z5 (~29bp of the ~34bp sell off).
• We previously identified June ‘25/December ’25 (SFIM5/Z5) as a spread of focus for those looking to express a dovish view.
• The pricing of cuts beyond year-end remains relatively flat (~10bp of cumulative easing priced between the Dec ’25 MPC-dated OIS and Mar ’26 contract), with the BoE’s gradualist approach to rate cuts and lingering inflationary risks seemingly providing some limitations to further dovish repricing at this stage.
• Note that this morning’s comments from the usually hawkish BoE MPC member Greene (detailed earlier) may have signalled a shift to a more centrist view, removing one potential hurdle to a deeper cutting cycle.
• While U.S. policy continues to present global inflationary risks, related downside risks to economic growth and the level of Bank Rate give the BoE plenty of room for further easing, if they choose to counter any future downside growth shocks.
• Tomorrow’s flash PMI data provides the next key dataset of note, with subsequent commentary set to come from BoE’s Pill, Bailey & Breeden.

Fig. 1: SONIA June ‘25/December ’25 & June ‘25/June ’26 Spreads

Source: MNI - Market News/Bloomberg

The US Treasury Department is expected to send Congress, next week, its projection for the so-called X-date, when the federal government exhausts its borrowing ability. 

• Punchbowl News reports: “Most estimates for the date when the federal government will reach its borrowing limit… peg it at some point this summer or early fall. But Treasury is expected to give its most updated estimate next week as April tax receipts come in.”
• The GOP is expected to raise the debt limit in its massive party-line reconciliation bill. The House blueprint calls for a $4 trillion hike, while the Senate blueprint calls for $5 trillion. Should the GOP fail to convince deficit hawks to back the debt limit boost in reconciliation, the GOP would be forced to address the measure in a standalone package requiring Democratic support.
• The Committee for a Responsible Federal Budget summarises the CBO and BPC X-date projections here.
• CRFB: “Specifically, CBO estimates that the X date – the date at which the U.S. will no longer be able to complete all of its obligations on time and in full – will be reached in August or September, when the “extraordinary measures” currently being employed by the Treasury Department will be completely exhausted. … the Bipartisan Policy Center estimated that the X date will fall between mid-July and early October.”