STIR: 90bp OF ECB Cuts Priced Through '25, Lane & Rehn Stick To Script

Modest hawkish repricing in EUR STIRs this morning as core global FI markets remain under pressure.

• ECB-dated OIS covering this month’s meeting little changed, showing 23.5bp of cuts, with ~90bp of easing now showing through December, as the recent round of hawkish repricing extends further.
• The market remains comfortable with the idea of cuts at the January and March meetings.
• However, the market-implied ECB cutting path is now much flatter, with pricing of the potential for 50bp steps removed in recent weeks.
• April & June meetings are priced much closer to 50/50 when it comes to the odds of further cuts.
• Euribor futures 1.0-3.5 lower, off session lows as Bunds edge away from lows in recent trade.
• Much of the strip is threatening clean breaks below October/November lows.
• Little of note in comments from ECB’s Lane & Rehn, sticking to the Bank’s central view.
• Lane noted that the Bank will have to follow “the middle path of being neither too aggressive nor too cautious in our actions.”
• Rehn pointed to a clear direction of travel, with rates set to leave restrictive territory come summer.
• Looking ahead, final Eurozone CPI data is due on Friday, with a raft of ECB speak and the minutes of the December meeting due throughout the week.