STIR: Just Over 70bp Of BoE Cuts Still Priced Through '25
Modest dovish repricing in the UK short end holds, with gilts consolidating their morning rally and little of note on the macro front to shift BoE pricing.
- BoE-dated OIS flat to 2bp more dovish on the day, showing 70.5bp of cuts through year-end. Dovish cycle extremes of ~74bp have not been retested.
- We continue to look for cuts in both February & May, with 23bp and 42.5bp of cuts priced through those events at present.
- The market has moved back towards our baseline view over the past couple of weeks, but probably needs fresh dovish cues to move closer towards fully discounting 50bp of cuts through May.
- SONIA futures flat to +3.0.
- Comments from BoE Governor Bailey kept away from direct monetary policy matters, with the BoE in its pre-meeting quiet period.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Feb-25 | 4.471 | -22.9 |
Mar-25 | 4.426 | -27.4 |
May-25 | 4.275 | -42.5 |
Jun-25 | 4.221 | -47.9 |
Aug-25 | 4.114 | -58.6 |
Sep-25 | 4.083 | -61.7 |
Nov-25 | 4.016 | -68.4 |
Dec-25 | 3.995 | -70.5 |
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GILT AUCTION PREVIEW: On offer next week
The DMO has additionally announced it will be looking to sell GBP2.25bln of the 4.375% Jul-54 Gilt (ISIN: GB00BPSNBB36) at its auction next Tuesday, January 7.
US: Trump Says Speaker Johnson Has His 'Total Endorsement'
US President-elect Donald Trump has issued a lengthy statement on his Truth Social site endorsing House Speaker Mike Johnson (R-LA) ahead of the January 3 speaker vote on the floor of the House of Representatives.
- Trump: "Speaker Mike Johnson is a good, hard working, religious man. He will do the right thing, and we will continue to WIN. Mike has my Complete & Total Endorsement. MAGA!!!"
- The statement comes after a damaging two-week period - starting in late December - when Trump and advisor Elon Musk torpedoed a Johnson-backed plan to fund the federal government. This week, a public spat over H-1B work visas has deepened fissures between the 'Silicon Valley' faction of the GOP, led by Musk, and the conservative 'America First' bloc of Trump's MAGA movement, raising concerns that a collapse of the GOP coalition could derail Trump's agenda.
- Trump's statement appears designed to patch up the rift ahead of the speaker vote, which will kickstart a challenging 100-day period when Trump needs near-unanimous support from House Republicans to pass a reconciliation package that will include immigration and energy legislation and likely a measure to suspend the federal debt ceiling.
- Rep Thomas Massie (R-KY) has stated he will vote 'no' on Johnson with Rep Victoria Spartz (R-IN) leaning towards 'no'. Assuming all Democrats are present and vote 'no', four dissenting Republican votes will sink Johnson's bid and force another speaker ballot.
- Chad Pergram at Fox News has a useful explainer on the implications of the speaker vote here.
GILT AUCTION PREVIEW: On offer next week
The DMO has announced it will be looking to sell GBP4.25bln of the new 4.375% Mar-30 Gilt (ISIN: GB00BSQNRD01) at its auction next Wednesday, January 8.
