STIR: Weak REC Jobs Report Has Little Impact On BOE Pricing
SONIA futures are flat to -1.0 ticks through the blues, with the weak KPMG-REC jobs report released overnight having little tangible impact on near-term BOE pricing. BOE-dated OIS continue to price ~5bps of easing through November and ~11bps of easing through year-end. The next full 25bp cut is not fully priced until March 2026.
- The REC report showed further labour market softening - the most notable of which was the "steepest upturn in candidate availability since November 2020."
- All in all, we conclude that the probability of a November 25bp cut is increased a little by this report and it follows the DMP survey last week to be another downbeat labour result.
- However, we still need to see continued deterioration in the official labour market statistics and other labour surveys ahead of the November decision (including Agents' survey). And importantly, any earlier indications regarding pay settlements for 2026 will be key to the decision, too.
- This week’s UK calendar is light, with BRC shop sales for August due overnight before monthly activity data for July crosses on Friday. Much more focus will be on next week’s labour market and inflation double header.
| Meeting Date | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| Sep-25 | 3.974 | 0.6 |
| Nov-25 | 3.918 | -4.9 |
| Dec-25 | 3.860 | -10.7 |
| Feb-26 | 3.747 | -22.0 |
| Mar-26 | 3.706 | -26.1 |
| Apr-26 | 3.631 | -33.6 |
| Jun-26 | 3.605 | -36.2 |
| Jul-26 | 3.563 | -40.4 |
| Source: MNI/Bloomberg Finance L.P |
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
