Why SFIU5U6 Is The Place To Be

Adding a view based on Bailey's comments.

The SONIA U5U6 spread has been steadily compressing since February as markets push out expectations for the Bank of England’s first rate cut well into 2026. In recent weeks, SFIU5 has remained largely pinned, tethered by the consensus around a single 25bps cut in the near term.

But it’s the far leg (SFIU6) that has shown more life, with rate cut pricing creeping higher. Today, we’re taking a closer look at just how far SFIU6 might extend this rally - and whether positioning via U5U6 is still the optimal way to express a view on a faster pivot from the BoE, or if there are cleaner avenues for those who want to play for a steeper cutting cycle in the next 18 months.