TRANSPORTATION: Cofiroute 8y

Little net movement in GBP STIRs this morning.

• BoE-dated OIS shows ~72bp of cuts through year-end.
• We continue to look for cuts in February and May, with ~22.5bp and ~42.5bp of cuts currently priced through those meetings.
• SONIA futures +0.5 to -1.0.
• Little of note on the UK calendar this week, which will leave focus on the long end & broader macro cues.

The Spanish Q4 unemployment rate was lower than expected at 10.6% (vs 11.1% cons, 11.2% prior). This was the lowest quarterly unemployment rate since Q2 2008.

• Spain’s economic outperformance post-covid has been driven by increased immigration and strong services industry performance. This has been reflected in solid labour market outcomes, with improvements seen in both hours worked and real productivity per hour worked relative to Italy, Germany and France.
• Analysts expect Spanish GDP growth to ease to 2.3% Y/Y in 2025 (vs 3.1% in 2024) – still above Eurozone peers.
• Employment rose 0.8% Q/Q in Q4, and the EC’s expected employment index remains above the expansionary 100 level. Employment rose in all sectors (services, industry, agriculture and construction).
• The labour force participation rate eased to 58.5% (vs 59.0% prior). 

Gilts tick lower on spillover from Trump’s latest comments on tariffs, although the move is modest.

• The uptick in e-mini futures since yesterday’s gilt close will also be adding some light pressure.
• Futures -16 at 92.26 vs. lows of 92.15.
• The medium-term trend condition in the contract remains bearish. However, recent gains continue to highlight a corrective phase and signal scope for a continuation higher near-term.
• Initial support and resistance located at 91.10/92.68.
• Yields little changed to ~1bp higher across the curve.
• BRC shop price data was released overnight but isn’t a market mover.
• The DMO will come to market with GBP1.5bln of the 1.125% Sep-35 linker today.
• A reminder that the DMO has announced that it will sell GBP1.5bln of the 0.125% Jan-26 gilt (ISIN: GB00BL68HJ26) via tender on Thursday. This is the gilt that we expected to be sold and the amount on offer is in the middle of the GBP1.0-2.0bln estimate that we pencilled in.