ECB Pricing Little Changed To Marginally Cheaper On The Day

ECB-dated OIS is little changed to 2bp softer on the day.

• Weaker oil prices and the recovery from session cheaps in regional FI markets have helped the modest easing in pricing, although ranges remain tight, given the ECB’s continued reference re: the need for persistence at current rate levels.
• That leaves terminal policy rate pricing 3bp or so above prevailing levels.
• Further out just over 75% odds of a 25bp cut are priced through June ’24 , with such a step more than fully priced through the end of the Bank’s July ’24 meeting.
• Comments from ECB’s Kazimir didn’t generate a meaningful market reaction, as he reiterated his hope that September’s rate hike was the last of the cycle. He also noted the Bank’s data-dependent stance by stressing the need to see the Bank’s economic projections in December and March. Finally, Kazimir believes that the Bank shouldn’t alter the PEPP reinvestment timetable.
• ECB Vice President de Guindos once again reiterated the Bank’s data-dependent stance, while stressing the belief that the current level of interest rates will help tame inflation. de Guindos also noted that it would be premature to discuss rate cuts at the current stage.
• Finally, ECB chief economist Lane failed to bring anything that was both fresh and meaningful to the policy debate.