STIR: Only Just Pricing 25bp Fed Cut In June
Mar-14 10:32
- Fed Funds implied rates are up to 1.5-2bp higher for Jun-Dec 2025 meetings overnight, helped by the stabilization in equity futures and crude oil futures lifting off yesterday’s lows.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 9bp May, 25bp Jun, 35bp Jul and 71bp Dec.
- It leaves a rate path at the high end of wide ranges seen for the week, with 70bp of cuts for 2025 back to almost exactly where we ended last week having at one point priced almost 90bps late Mon/early Tue.
- Growth concerns clearly weigh further out the curve though, with 2027 SOFR implied yields still 6-7bps lower on the week.
- The preliminary U.Mich consumer survey for March is likely watched again although partisanship has seen its quality called into question. 1Y expectations have spiked to 4.3% and 5-10Y have increased to a multi-decade high of 3.5% but these moves haven’t been reflected in the NY Fed’s equivalent survey for February.
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GILTS: Bullish Momentum Stalling
Feb-12 10:30
Supply-related pressure across wider core global FI markets and spillover from a rally in European equities weighed on gilts at the open, with fresh selling seen in recent trade.
- A downtick in oil has limited the weakness.
- Futures as low as 92.80.
- First support at the 20-day EMA (91.63), with the short-term bullish cycle still intact but losing some momentum.
- Yields 1.5-2.5bp higher across the curve.
- 10-Year spread to Bunds little changed at ~207.5bp.
- Local headline flow has been dominated by NIESR’s higher-for-longer view surrounding the BoE (looking for one cut in both ’25 and ’26, leaving Bank rate at 4.00%) and suggestions surrounding the erosion of the UK’s narrow fiscal headroom (not a new idea)
- GBP1bln of 0.625% 0.625 Mar-45 I/L supply was digested smoothly.
- Modest hawkish adjustments in GBP STIRs seen given the moves in the long end.
- 58.5bp of BoE cuts priced through year-end vs. 60bp early today.
- SONIA futures flat to -2.0.
- Comments from BoE MPC member Greene due this afternoon (15:00 GMT).
- Spill over from U.S. CPI data also eyed.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.407 | -4.7 |
May-25 | 4.211 | -24.3 |
Jun-25 | 4.134 | -32.0 |
Aug-25 | 3.989 | -46.5 |
Sep-25 | 3.953 | -50.1 |
Nov-25 | 3.883 | -57.2 |
Dec-25 | 3.869 | -58.5 |
ITALY DATA: Italy IP Surprisingly Slides But Data Volatility Caveat
Feb-12 10:22
Italian December industrial production was weaker than expected falling 3.1% M/M swda (vs -0.2% consensus), after rising 0.3% in November. On a 3m/3m basis, industrial production deteriorated further to -1.1% from -0.7% in November.
- On the month, there were heavy declines across the main categories (consumer goods -3.3%, intermediate goods -3.6% and capital goods -3.3%) whilst energy bounced 1.0% - all on a SWDA basis.
- A reminder though that the underlying data are prone to particularly large swings, which display a heavy seasonal pattern but the magnitude of which can make adjustment difficult: actual NSA production fell -17% M/M compared to the -20% M/M in Dec 2023 whilst the working day adjusted only data saw -19% M/M after -14% M/M in Dec 2023.
- Industrial sentiment in Italy remains weak, with the manufacturing PMI in contractionary territory for 10 consecutive months (46.3 in January). The ISTAT manufacturing confidence series continues to remain below its 2000-2019 average at 86.8 in January (vs 91.0 average).
- 3m/3m production in consumer goods remains positive in December, whilst energy has returned to growth from a slight decline in November. Conversely, 3m/3m intermediate and capital goods production were negative and deteriorated further in December.
- Looking at manufacture of motor vehicles, trailers and semi-trailers specifically fell 3.5% M/M, after rising 0.7% in November. The 3m/3m series has been negative since December 2023, and deteriorated further in December to -12.5% from -11.9% in November.
EURIBOR: EURIBOR FIX - 12/02/25
Feb-12 10:21
EURIBOR FIX - EMMI/Bloomberg.
- EUR001W 2.6580 -0.0030
- EUR001M 2.6160 0.0010
- EUR003M 2.5530 0.0140
- EUR006M 2.4860 0.0050
- EUR012M 2.3700 -0.0040
