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EURIBOR: Citi & Goldman Maintain Recommendation To Sell Jun '25/Dec '25 Spread

EURIBOR
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Both Citi & Goldman Sachs continue to like Euribor June ‘25/December ’25 (ERM5/Z5) flatteners: 

  • Citi: The ECB is facing a rapidly changing landscape with the sharp sell-off reversing much of the impact of cuts so far on long-term real yields. The January meeting is unlikely to offer a dovish fightback, however, with the GC instead gearing up for a lively debate over what neutral looks like. A slowing in cuts beyond March cannot be ruled out and is one reason why we still like ERM5/Z5 flatteners
  • Goldman Sachs: Given the ECB has been reluctant to provide explicit easing guidance so far, we think communication (this week) is unlikely to point towards a faster (or even consecutive) series of cuts. As a result, we continue to like ERM5/Z5 flatteners as prospects for easing are delayed rather than removed.
  • The spread is 1.5 ticks lower on the day at -13.0, driven by the DeepSeek news outlined elsewhere.
  • The spread remains in the multi-week range (shown in the chart below).

Fig. 1: Euribor June ‘25/December ’25 Spread (ERM5/Z5)

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Both Citi & Goldman Sachs continue to like Euribor June ‘25/December ’25 (ERM5/Z5) flatteners: 

  • Citi: The ECB is facing a rapidly changing landscape with the sharp sell-off reversing much of the impact of cuts so far on long-term real yields. The January meeting is unlikely to offer a dovish fightback, however, with the GC instead gearing up for a lively debate over what neutral looks like. A slowing in cuts beyond March cannot be ruled out and is one reason why we still like ERM5/Z5 flatteners
  • Goldman Sachs: Given the ECB has been reluctant to provide explicit easing guidance so far, we think communication (this week) is unlikely to point towards a faster (or even consecutive) series of cuts. As a result, we continue to like ERM5/Z5 flatteners as prospects for easing are delayed rather than removed.
  • The spread is 1.5 ticks lower on the day at -13.0, driven by the DeepSeek news outlined elsewhere.
  • The spread remains in the multi-week range (shown in the chart below).

Fig. 1: Euribor June ‘25/December ’25 Spread (ERM5/Z5)

Keep reading...Show less