STIR: Soft GDP Revisions Promotes Modest Dovish Flow In UK STIRs
Dec-22 07:52
Pre-gilt trade sees a tick higher in SONIA futures, with the marks lower in final Q3 UK GDP data outweighing the impact of firmer-than-expected prints in the volatile retail sales series. That leaves the strip running flat to 3bp firmer through the blues.
- BoE-dated OIS shows 0.5-4.5bp lower through ’24 MPC meetings, with a cumulative ~146bp of cuts priced through the year on the whole, challenging the recent dovish extremes after CPI data reignited dovish flows earlier this week.
- There isn’t much in the way of meaningful scheduled domestic risk events to flag ahead of the weekend.
| BoE Meeting | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Feb-24 | 5.198 | +1.1 |
| Mar-24 | 5.110 | -7.7 |
| May-24 | 4.892 | -29.5 |
| Jun-24 | 4.657 | -53.0 |
| Aug-24 | 4.385 | -80.2 |
| Sep-24 | 4.144 | -104.3 |
| Nov-24 | 3.901 | -128.6 |
| Dec-24 | 3.724 | -146.3 |
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UK: Autumn Statement: Potential Market Movers (2/2)
Nov-22 07:49
- The other thing to watch will be if there are any policies that the market perceives to be immediately inflationary - a big cut to income tax could come in this category. This would likely see some steepening of the SONIA curve with the market reassessing how many cuts would be appropriate next year.
- One other potential market mover is any change to pension regulations, a potential new superfund and incentives to invest in large scale long-term UK infrastructure projects – particularly for defined benefit pension schemes. Depending on how this is structured (and if there are enough incentives to actually change investment decisions) this could have potentially large impacts on the long-end of the curve in particular.
UK: Autumn Statement: Potential Market Movers (1/2)
Nov-22 07:44
- Consensus estimates for the remit revision are around a GBP15bln or so reduction to around GBP220bln (GBP220.0bln median / GBP222.1bln mean from the previews that we read).
- Although the remit is based off CGNCR (the cash measure), we should get an idea earlier on based on the revisions to the PSNBex numbers the Chancellor will read out the size of the remit revision (although the accrual and cash measures don't always match up). This will likely move the market somewhat while the measures are set out.
- When the remit is announced, some are expecting a more skewed reduction in long/linker issuance - if this isn't the case or if the remit is reduced by less than expected we could get some steepening of the curve. (Although there could be further changes later at 15:30GMT when the DMO's FQ4 consultation agenda is announced).
STIR: SONIA Holds Pot-Settlement Losses, Fiscal Matters Dominate Today
Nov-22 07:41
The downtick in core global FI markets since the time of yesterday’s SONIA settlement has applied pressure to SONIA futures, although most of that came pre-close, leaving futures flat to -6.5 through the blues, with the reds leading the weakness.
- BoE-dated OIS is flat to 3bp firmer across liquid contracts, with the core global FI downtick also at the fore there.
- A quick reminder that the higher for longer mantra was at the centre of yesterday’s deluge of BoE speak, while the door to further hikes was left open once again (even if it is not the base case for most MPC members), dependent on the inflation trajectory.
- Local headline flow has seen continued focus on today’s Autumn Statement, with the UK press pointing to an emphasis on business tax cuts (after PM Sunak intimated that focus of any tax relief measures will largely centre on the supply side of the economy), in addition to national insurance tax cuts for individuals (press outlets have flagged the likelihood a pre-election income tax cut in the Spring Budget).
- The Autumn Statement presents the highlight of the UK docket today. See our full preview of that event here.
