STIR: Market continues To Favour Cuts At BoE MPR Meetings

Feb-14 11:51

The market continues to assign greater odds of rate cuts to BoE meetings that are accompanied by an MPR vs. non-MPR meetings.

This makes sense to us at this stage, given the Bank’s reference to careful and gradual easing, alongside clouded policy visibility.
The clouded policy visibility and lingering inflation risk means that only ~8bp of easing is priced between the end of the September MPC and year-end (albeit front-loaded into the Nov meeting, which equates for 7 of the 8bp).
Note that 50bp of cuts are almost fully priced through September.
Extension of the quarterly rate cutting pattern could lead to receiving pressure in the belly of the Sep/Nov/Dec BoE-dated OIS fly, particularly if dovish data and more forthright guidance on BoE rate cuts becomes evident in the coming months (CPI and wage readings continue to dominate BoE thinking)
Note that GBP STIR pricing echoes the previously covered bias towards pricing ECB rate cuts at meetings that are accompanied by that central bank’s economic projections.

BoE Meeting	SONIA BoE-Dated OIS (%)	Difference vs. Current Effective SONIA Rate (bp)
Mar-25	4.429	-2.5
May-25	4.234	-22.0
Jun-25	4.152	-30.2
Aug-25	4.002	-45.2
Sep-25	3.971	-48.3
Nov-25	3.903	-55.1
Dec-25	3.891	-56.3

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Jan-15 11:43

On the commodity front, recent gains in Gold appear corrective. However, the yellow metal continues to hold on to the bulk of last week’s gains and scope is seen for a continuation higher near-term. A stronger recovery would open $2726.2, the Dec 12 high and an important resistance. On the downside, a reversal lower would expose $2583.6, the Dec 19 low. Initial support is at $2644.3, the 50-day EMA.
In the oil space, the trend structure in WTI futures remains bullish and the contract is trading just ahead of its recent highs. The stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high. On the downside, a reversal lower would expose the 20-day EMA, at $73.15. This average is seen as a key short-term support.

Jan-15 11:40

Treasuries are modestly richer across the curve this morning after yesterday’s twist steepening, with US CPI set to headline the docket (MNI Preview here). Away from the regular calendar, today also sees a heavy schedule for bank earnings.
Cash yields are 1.5-2.7bp lower on the day, with declines led by 7s.
2s10s sits at 41.6bp (-1.2bps), off yesterday’s 43.2bps that came within less than 0.5bp of recent highs.
TYH5 has lifted to 107-15+ (+04) but has remained within yesterday’s range throughout, on reasonable cumulative volumes for a pre-CPI overnight session of 285k.
The trend structure remains bearish with support at 107-06 (Jan 13 low) whilst a softer CPI print could see greater attention on resistance at 108-17+ (20-day EMA).
Data: MBA mortgages (0700ET), CPI Dec (0830ET), Real av earnings Dec (0830ET), Empire mfg Jan (0830ET)
Fedspeak: Barkin (0920ET), Kashkari (1000ET), Williams (1100ET), Goolsbee (1200ET), Fed Beige Book (1400ET) – see STIR bullet.
Bill issuance: US Tsy $64B 17W bill auction

Jan-15 11:31

OI data points to a mix of net long setting and short cover during Tuesday’s uptick in SOFR futures.

The most notable positioning swings came via net long setting in SFRM5 & Z5 and net short cover in SFRH6.
Net pack positioning swings were more modest than what was seen in recent sessions.

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