Commerzbank Still Consider Sub-3% Schatz Yields To Be A “Pre-Mature” Move

Commerzbank still “consider Schatz yields below 3% as pre-mature with more than 90bp of rate cuts priced in by the end of next year.”

• “ECB dove Stournaras reiterated his dovish view that the ECB could think about a "small" rate cut next summer if "around August, inflation falls below 3% on a permanent basis".”
• “The market is discounting the first full rate cut by June though and for the governing council to find a majority for four rate cuts by year-end, a more significant economic downturn alongside lower inflation would probably be required.”
• “This pricing could be in for a reality check this morning. A decline in the ECB CES inflation expectations would be important after the last two months saw expectations rise again. Throughout the day the market then has to digest a busy line-up of no less than 7 rather diverse ECB speakers.”