SONIA: Dovish Move In BoE Pricing After Soft GDP, 61bp Cuts Priced Through '26
The softer-than-expected run of monthly economic data promotes some dovish repricing on the GBP STIR strip, extending on the dovish rebound seen yesterday.
- Our macro team noted that the weakness in the GDP data was broad-based, although just under half of the surprise may be attributable to the ongoing impact stemming from the JLR production outage.
- BoE-dated OIS 0.5-3.0bp more dovish across liquid contracts, 22bp of easing priced for next week’s decision, ~61bp of easing priced through December ’26.
- SONIA futures flat to +3.0.
- Terminal rate pricing trades back below 3.40% after threatening to test 3.50% earlier in the week. A reminder that doves failed to force a meaningful break below 3.30% in recent weeks.
- The latest BoE-Ipsos inflation expectations survey is due this morning.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.754 | -22.0 |
Feb-26 | 3.687 | -28.7 |
Mar-26 | 3.606 | -36.9 |
Apr-26 | 3.502 | -47.2 |
Jun-26 | 3.459 | -51.5 |
Jul-26 | 3.401 | -57.3 |
Sep-26 | 3.387 | -58.7 |
Nov-26 | 3.367 | -60.7 |
Dec-26 | 3.366 | -60.9 |
Feb-27 | 3.375 | -59.9 |
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GILT SYNDICATION: 1.75% Sep-38 linker preview
- There will only be one DMO operation this week with the syndicated tap of the 1.75% Sep-38 linker on offer with a transaction expected today.
- The last two conventional syndications in September and October of the new 10-year 4.75% Oct-35 gilt and long 15-year 5.25% Jan-41 gilt have both seen very strong demand.
- The syndication before that was the launch of the 1.75% Sep-38 linker for GBP5.5bln nominal on 10 June.
- This was also a very well received syndication with books of GBP61.3bln and pricing at the tighter end of guidance at the 1.125% Nov-37 linker plus 11.75bp.
- We expect to see further strong demand, albeit with books potentially a little smaller and a transaction size that is similar or marginally smaller at GBP4.5-5.5bln.
- Timing: Books are expected to open at either 8:30GMT or 9:00GMT and then to remain open for an hour. The syndication size will then likely be confirmed around 20-60 minutes after books close with pricing expected around lunchtime.
STIR: Over 80% Odds Of BoE Dec Cut Still Priced, Next Week's CPI Eyed
Little net movement in GBP STIRs this morning, with the short end consolidating the bulk of the dovish repricing that followed the soft labour market report (our full review of that release is here).
- BoE-dated OIS is flat to 1bp less dovish vs. closing levels, showing 20.5bp of easing for December, 31bp through February, 40bp through March and 51bp through April.
- SONIA futures flat to -1.5. SFIZ6 registered an incremental fresh year-to-date high yesterday, with SONIA-implied terminal rate pricing last ~3.30%.
- Next week’s CPI data presents the next major scheduled UK risk event.
- We have already noted that in line releases in the next 2 inflation reports would likely be enough to push Governor Bailey to vote for a rate cut in December, cementing a cut (assuming the weakness in the labour market data isn’t revised away and that the views of the other MPC members remain entrenched).
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Dec-25 | 3.764 | -20.6 |
Feb-26 | 3.658 | -31.1 |
Mar-26 | 3.569 | -40.0 |
Apr-26 | 3.456 | -51.3 |
Jun-26 | 3.408 | -56.1 |
Jul-26 | 3.355 | -61.5 |
Sep-26 | 3.329 | -64.0 |
EQUITY TECHS: E-MINI S&P: (Z5) Bullish Recovery Extends
- RES 4: 7000.00 Psychological round number
- RES 3: 6993.12 3.500 proj of the Aug 20 - 28 - Sep 2 price swing
- RES 2: 6974.04 3.382 proj of the Aug 20 - 28 - Sep 2 price swing
- RES 1: 6909.50/6953.75 High Nov 3 / High Oct 30 and bull trigger
- PRICE: 6892.00 @ 07:24 GMT Nov 12
- SUP 1: 6808.31/6655.70 20-day EMA / Low Nov 7 & key S/T support
- SUP 2: 6571.25 Low Oct 17
- SUP 3: 6540.25 Low Oct 10 and a key support
- SUP 4: 6476.62 23.6% retracement of the Apr 7 - Oct 30 bull cycle
The trend condition in S&P E-Minis remains bullish and the bear leg since the Oct 30 high appears to have been a correction. The contract has managed to find support below the 50-day EMA, currently at 6722.19, and a key level. Activity on Nov 7 highlights a potential reversal signal - a bullish doji candle. This defines key support at 6655.50, the Oct 7 low. Sights are on 6953.75, Oct 30 high and bull trigger.
