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ECB Pricing Titled Towards A Hike Today, Terminal Pricing Stabilises Around 4.00%

STIR

Liquid ECB-dated OIS contracts are essentially little changed on the day, operating within 1bp of yesterday’s closing levels.

  • The bulk of the adjustment in the wake of the hawkish RTRS sources piece (single-sourced, released late Tuesday) has stuck, leaving ~17bp of tightening (~68% chances) of a 25bp hike priced for today's decision.
  • The BBG survey narrowly leans towards no move in rates. 34 look for no move in the deposit rate, while 32 look for a 25bp hike.
  • Our own informal survey is tilted more towards a hike than market pricing implies.
  • Ultimately the debate will come down to hawkish impetus surrounding inflation expectations (although most ECB hawks have moderated views towards the centre in recent weeks) vs. dovish worry surrounding soft economic activity data.
  • Beyond today, terminal deposit rate pricing has settled around the 4.00% mark.
  • Click for our full preview of today’s decision.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Current Effective €STR Rate (bp)
Sep-233.824+17.2
Oct-233.879+22.7
Dec-233.911+25.9
Jan-243.899+24.7
Mar-243.857+20.5
Apr-243.790+13.8
Jun-243.693+4.1
Jul-243.592-6.0
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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