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STIR: Citi Expect Euribor/SOFR Correlation To Re-establish Itself Through '25

STIR
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Citi believe that “the inference for the € front-end from a neutral FOMC meeting would likely be limited.”

  • They note that “while both € and $ STIR futures have re-priced aggressively since the 18 Dec FOMC, whites drove the cheapening on the Euribor strip, while the SOFR selloff has been led by blues and golds.”
  • They go on to suggest that “the lack of compelling co-movement between the two front-ends has emerged over the last couple of weeks, more so in reds.”
  • However, they think “that a common richening trend will be asserted in the second half of the year.”
  • Given that their economists “still expect slowing inflation and growth to ultimately lead to five 25bp cuts beginning in May for the Fed. While for the ECB, their expectation is for continued 25bp cuts until an expansionary 1.5% depo rate is reached in September.”
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Citi believe that “the inference for the € front-end from a neutral FOMC meeting would likely be limited.”

  • They note that “while both € and $ STIR futures have re-priced aggressively since the 18 Dec FOMC, whites drove the cheapening on the Euribor strip, while the SOFR selloff has been led by blues and golds.”
  • They go on to suggest that “the lack of compelling co-movement between the two front-ends has emerged over the last couple of weeks, more so in reds.”
  • However, they think “that a common richening trend will be asserted in the second half of the year.”
  • Given that their economists “still expect slowing inflation and growth to ultimately lead to five 25bp cuts beginning in May for the Fed. While for the ECB, their expectation is for continued 25bp cuts until an expansionary 1.5% depo rate is reached in September.”