BOC: Shift In Statement Language Could Reflect Above-Expected Core Inflation
A key change in the BOC policy statement is the addition of "If a weakening economy puts further dow...
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EQUITIES: Longer Dated Estoxx Call Spread
SX5E (19/06/26) 6000/6500cs 1x2, bought for -9.4 (receive) in 5k (5k x 20k).
GILTS: Sell Off quickly Fades, Support In Futures Untouched
Gilt futures recover from a brief and shallow showing through Friday’s low.
- No overt drivers of the blip lower and subsequent recovery with headline flow remaining light.
- Initial support at the 20-day EMA (92.67) remains untested, with session lows of 92.83 registered before a bounce back above 93.00.
- Yields 1.5-2.5bp lower on the day, ~3bp off session highs.
- Both 2s10s and 5s30s a touch steeper on the day, set to register fresh June closing highs.
- Front end pricing continues to stick to tight ranges.
- SONIA futures flat to +3.5.
- BoE-dated OIS showing 54bp of cuts through year-end, with 80% odds of the next 25bp step coming in August and such a move fully discounted through September.
- Doves have not been able to force pricing through 55bp of cuts through December in recent sessions.
- UK-centric discussions continue to focus on fiscal fragility and PM Starmer’s political difficulties, little impact from today’s data.
- U.S. ISM manufacturing data headlines the macro docket during Tuesday’s session, while Tuesday’s UK calendar is dominated by final manufacturing PMI and comments from BoE Governor Bailey.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.015 | -20.2 |
Sep-25 | 3.943 | -27.4 |
Nov-25 | 3.771 | -44.6 |
Dec-25 | 3.678 | -53.9 |
Feb-26 | 3.542 | -67.5 |
Mar-26 | 3.501 | -71.6 |
FRANCE: Bayrou Faces 1 July Censure Motion, But Main Threat Comes In Autumn
Prime Minister Francois Bayrou and his government face a motion of no confidence in the National Assembly on 1 July after the centre-left Socialist Party (PS) put forward the measure over the breakdown in talks over controversial pension reforms pushed through by President Emmanuel Macron in 2023. Bayrou is set to survive the vote, with the far-right Rassemblement National (RN, National Rally) having said they will abstain, denying the PS and other parties of the left the requisite majority to remove Bayrou. No set time for the censure motion yet, but debate on the Dec 2024 motion got underway ~16:00CET.
- All of the parties and groups that formed the left-wing New Popular Front (NFP) alliance in the 2024 legislative election (PS, the environmentalist Ecologist Group, the communist Democratic and Republican Left group, and the far-left populist La France Insoumise (LFI, France Unbowed)) vote against Bayrou they would fall short of the 289 required for a majority. Even if the regionalist Liberties, Independents, Overseas and Territories (LIOT) group and the non-inscrits vote against Bayrou en masse, the group would only hold 226 votes.
- Leader of the RN in the National Assembly Marine Le Pen said in an interview with Valeurs actuelles that "The first options raised by Mr Bayrou for his next budget make me think that he is taking the same path as his predecessor,". Le Pen is referring to Michel Barnier, whom the NFP and RN both voted to oust in a December 2024 censure motion, with the threat that Bayrou could face the same fate come autumn budget talks.
Chart 1. Potential Backers of Censure Motion Against PM Bayrou, Seats
Source: Le Monde, MNI
