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EGBS
EUR5y5y inflation swaps have consolidated above 2.50% despite yesterday’s run of German & French CPI data and the latest leg lower in crude oil prices.
- Citi note that yesterday's inflation releases “appeared to weigh more on the nominal rather than spot breakevens despite the concurrent fall in energy prices. Perhaps even more striking, 5y5y HICP swaps fell by 1bp to 2.52% and are broadly unchanged on the week despite the duration rally. Our view of inflation premium stickiness was further encouraged by the ongoing rotation in services price inflation, which has yet to show distinct signs of moderation.”
- Meanwhile, Commerzbank note that “inflation markets mirror the headline/goods vs services inflation divergence: the pressure remains concentrated on the front while longer-dated ILS continue to outperform, hence cushioning the pressure on 5y5y. In addition, the 5y vs. 10y € ILS curve is trading back in positive territory at levels last seen in mid-2021 while 5y5y (as well as spot) ILS continue to shrug off the pressure from falling oil prices, holding above 2.50%. Hence, inflation markets continue the shift away from pricing price shocks to pricing structural inflation pressure via wages which argues for ongoing upside risks for 5y5y € ILS."
Fig. 1: EUR 5y5y Inflation Linked Swaps (%)
Source: MNI - Market Nnews
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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