ECB Terminal Pricing Showing Back Above 3.90%

The general travel of core global FI markets leaves ECB-dated OIS little changed to 3bp higher vs. closing levels, with terminal rate pricing just above 3.90% in deposit rate terms.

• This morning’s ECB speak has seen Nagel keep the option of a hike after the summer break on the table, while Vasle stressed that any such step is data-dependent after voicing his support for another hike in July. Elsewhere, Simkus also voiced his support for a July hike, also pushing back against any talk of rate cuts at the start of ’24.
• The higher for longer rates dynamic is becoming a focal point for markets when it comes to the ECB, with a July hike deemed likely by President Lagarde (near enough fully priced by markets), as she stressed the Bank’s “persistence” when it comes to fighting inflation.
• On that front, the latest BBG sources piece suggested that “European Central Bank officials expect a tough debate next month on whether another interest-rate hike at the following meeting, in September, will be necessary.”
• Meanwhile, RTRS sources noted that “European Central Bank policymakers began this week a debate on evening out the "corridor" between the ECB's three interest rates, in a first step towards an era in which money is scarcer.”
• In terms of ECB speak, Villeroy, Rehn, Centeno, Holzmann & Muller are all due to cross today, with the potential for plenty of unscheduled remarks also evident (as we have already seen).

Note that the above table assumes a 25bp adjustment vs. the most recent €STR overnight rate levels.