Commerzbank Maintain Tactical Short Bias

Pre-ECB Commerzbank write “at the end of the day, the resilient risk sentiment with equities at all-time highs may tip the scale toward a more hawkish tone as Lagarde should be mindful not to add fuel to that rally (last week she stressed that unrealistic rate cut speculation is "not helping our fight against inflation").”

• “Changes to other policy instruments like the purchase programs seem unlikely, especially as the path for €QT has already been laid out. Risks remain with respect to remuneration changes, but we don't expect any material adjustments ahead of the conclusion of the operational framework review scheduled for spring.”
• “In sum, a hawkish ECB should make markets further question the view for early cuts and thus weigh on front-end valuations. We also stick to our tactical short bias with 10y Bund yields below 2.5%.”