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Early ’26 has seen GBP 1y1y threaten a break below the base of the wedge pattern that has formed in recent months (3.3883% today), with ongoing weakness in the UK labour market and a swifter than previously envisaged disinflationary process generating a dovish move.

• Still, a meaningful move lower from here probably requires a more dovish tone being struck at the BoE (after the ‘hawkish’ cut seen at the final ’25 meeting) or fresh cues from macro data, with the market unable to fully discount a cumulative 50bp of easing through year-end at this stage.
• Further deterioration on the quantity side of the labour market presents the most obvious potential short-term dovish catalyst, in our view.
• Thie latest KPMG-REC report on jobs added to the run of soft labour market readings (on the quantity side) on Monday.
• The next monthly ONS labour market report is due on Tuesday of next week.
• Fresh dovish impetus would place focus on the year-to-date low (3.3642%), which protects the May ’25 base (3.3429%).
• Meanwhile, a firmer-than-envisaged outcome on either the quantity or wage side in next week’s data could alleviate some of the recent dovish pressure.

Fig. 1: GBP 1y1y (%)

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

• Size: EUR benchmark (MNI expects E8-10bln)
• Books in excess of E115bln (inc E4bln JLM interest)
• Spread set: 3.25% May-45 OAT + 5bp (guidance was + 8bp area)
• Maturity: 25 May 2046
• Coupon: First full
• ISIN: TBC
• Settlement: 21 January 2026 (T+5)
• Bookrunners: BNPP, Citi (B&D), HSBC, JPM, SocGen
• Timing: Books to close at 10:15GMT / 11:15CET, today's business

From market source / MNI colour

SX5E (20th Feb) 6150/6250cs, bought for 20.5 and 20.7 in 7.5k.