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ECB Cut Pricing Pulls Back Following Initial Flash Inflation/PMI Data

STIR

ECB-dated OIS contracts have pulled back rate cut expectations as French/German state-level flash inflation and Eurozone services PMIs filtered through this morning.

  • After peaking around 169bps before the French inflation release at 0745GMT, contracts now price around 157bps of rate cuts through 2024.
  • March rate cut pricing has been pared back to 13bps (vs 18bps earlier), while the first rate cut remains fully priced through the April meeting, with 36bps priced.
  • Global core FI markets have sold off even as German state-level data points to a roughly in-line reading, with upward services PMI revisions providing additional downside momentum.
  • The Euribor strip has followed suit, trading -3.0 to -8.5 ticks lower through the Blues.
    Meeting Date ESTR ECB-Dated OIS (%)Difference Vs. Current Effective ESTR Rate (bp)
    Jan-243.895-0.90
    Mar-243.771-13.3
    Apr-243.545-35.9
    Jun-243.240-66.4
    Jul-242.966-93.8
    Sep-242.724-118.0
    Oct-242.526-137.8
    Dec-242.339-156.5
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