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STIR: 100bp Of ECB Cuts Priced For ’25 After Hesse CPI

STIR
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Firmer-than-expected Hesse CPI data out of Germany (based on comparisons with the national CPI expectations) drives further hawkish repricing on the ECB-dated OIS strip, with 100bp of cuts now priced through ’25.

  • This compares to 115-120bp seen just before the Christmas break.
  • ~26bp and ~27bp of cuts show over the next two ECB decisions, respectively, as market-implied odds of an upsized rate cut are pared further.
  • A reminder that methodology alterations and regional holidays means that Hesse provides the only major regional CPI release ahead of this afternoon’s German national CPI release.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Current Effective €STR Rate (bp)
Jan-252.661-25.8
Mar-252.393-52.6
Apr-252.204-71.5
Jun-252.080-84.0
Jul-252.038-88.1
Sep-251.971-94.8
Oct-251.939-98.0
Dec-251.919-100.0
  • Euribor futures are 3.0-5.5bp lower at typing.
  • ERZ5 8.0 off its November low and 11.0 off its October low.
  • SOFR/Euribor and SONIA/Euribor Dec ’25 spreads continue to move away from their late ’24 highs.

Fig. 1: SOFR/Euribor and SONIA/Euribor December ’25 (Z5) Spreads

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Firmer-than-expected Hesse CPI data out of Germany (based on comparisons with the national CPI expectations) drives further hawkish repricing on the ECB-dated OIS strip, with 100bp of cuts now priced through ’25.

  • This compares to 115-120bp seen just before the Christmas break.
  • ~26bp and ~27bp of cuts show over the next two ECB decisions, respectively, as market-implied odds of an upsized rate cut are pared further.
  • A reminder that methodology alterations and regional holidays means that Hesse provides the only major regional CPI release ahead of this afternoon’s German national CPI release.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Current Effective €STR Rate (bp)
Jan-252.661-25.8
Mar-252.393-52.6
Apr-252.204-71.5
Jun-252.080-84.0
Jul-252.038-88.1
Sep-251.971-94.8
Oct-251.939-98.0
Dec-251.919-100.0
  • Euribor futures are 3.0-5.5bp lower at typing.
  • ERZ5 8.0 off its November low and 11.0 off its October low.
  • SOFR/Euribor and SONIA/Euribor Dec ’25 spreads continue to move away from their late ’24 highs.

Fig. 1: SOFR/Euribor and SONIA/Euribor December ’25 (Z5) Spreads

Keep reading...Show less