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EGBS: German Yields Lower Despite Hawkish Schnabel, OAT Widening Persists

EGBS
BulletEurozoneFixed Income BulletsMarkets

The German curve has bull flattened this morning, with the short-end lagging after a hawkish-leaning interview by ECB Executive Board member Schnabel. 2-year German yields are ~1.5bps lower today, while 10-year yields are almost 4bps lower.

  • Schnabel warned against cutting rates into accommodative territory, pushing back on current market pricing of a ~1.75% terminal rate.
  • ECB-dated OIS now price 30bps of easing through the December meeting, down from 32bps this morning. Meanwhile, there are 148bps of easing priced through the end of next year, 3bps less dovish than before Schnabel's interview was published.
  • Bund futures are +65 ticks at 134.22, having reversed almost all of the Schnabel-induced knee-jerk lower.
  • The 10-year OAT/Bund spread is 1bp wider today at 87bps, after rising sharply into yesterday’s close on renewed political uncertainty.
  • With the remainder of today’s regional calendar light, focus turns to the significant amount of US data due this afternoon. 
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The German curve has bull flattened this morning, with the short-end lagging after a hawkish-leaning interview by ECB Executive Board member Schnabel. 2-year German yields are ~1.5bps lower today, while 10-year yields are almost 4bps lower.

  • Schnabel warned against cutting rates into accommodative territory, pushing back on current market pricing of a ~1.75% terminal rate.
  • ECB-dated OIS now price 30bps of easing through the December meeting, down from 32bps this morning. Meanwhile, there are 148bps of easing priced through the end of next year, 3bps less dovish than before Schnabel's interview was published.
  • Bund futures are +65 ticks at 134.22, having reversed almost all of the Schnabel-induced knee-jerk lower.
  • The 10-year OAT/Bund spread is 1bp wider today at 87bps, after rising sharply into yesterday’s close on renewed political uncertainty.
  • With the remainder of today’s regional calendar light, focus turns to the significant amount of US data due this afternoon.