EU TRANSPORTATION: InterContinental Hotels: Final Books

The SONIA/Euribor Dec ’26 Spread has formed double bottom support in the 145.5/146bp area, with focus on this week’s BoE vote split key given almost full discounting of and unanimous expectations for a 25bp cut on Thursday.

• With the market now more assured when it comes to pricing the ECB terminal rate (leaning towards one further 25bp cut in this cycle) any meaningful repricing is likely to come from the SONIA leg of the spread.
• Goldman Sachs remain long SFIZ6 vs. ERZ6.
• Signs of a slowing UK labour market have not been enough to promote a meaningful dovish repricing across ’26 SONIA spreads as of yet, with the SFIZ5/Z6 spread discounting just over 25bp of easing.
• With sticky inflation worries no doubt present, BoE cues may be required for a fresh extension lower, if such a move is to be forthcoming.
• We will provide deeper insight in our BoE preview but remind that the accompanying guidance at this week’s BoE decision is widely expected to be left unchanged with the "gradual", "restrictive" and "careful" buzzwords all likely to remain.
• Based on the 17 previews that we had read as of Friday providing vote split expectations:
• The modal expectation is a 2-5-2 vote split (7/17).
• 11 expect two votes for 50bp cut, 3 expect one vote, 3 expect no votes for 50bp cut
• 2 expect three votes for on hold, 9 expect two votes on hold, 4 expect 1 vote on hold, 2 expect no votes for on hold.
• 2-4-3 (50-25-0) is the most split committee within an analyst's base case, 0-9-0 is also an analyst's base case.

Fig. 1: SONIA/Euribor December ’26 Spread

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

• MNI: US JUN FACTORY ORDERS -4.8%; EX-TRANSPORT NEW ORDERS +0.4%
• US JUN DURABLE ORDERS -9.4%
• US JUN NONDEFENSE CAP GOODS ORDERS EX AIRCRAFT -0.8%

• MNI: US JUN FACTORY ORDERS -4.8%