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EGBS: Reuters Sources Drives Renewed Dovish Repricing In EUR STIRs and EGBs

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

A dovish Reuters ECB sources piece has helped EUR STIRs and major EGB futures extend the bounce of intraday lows. Bund futures are +22 ticks today at 134.06 (vs a low of 133.67 this morning).

  • Reuters reported that some ECB policymakers wanted to drop guidance that rates would be "sufficiently restrictive for as long as necessary" at the October meeting, though the idea did not gain traction.
  • The subsequent dovish repricing in EUR STIRs has helped EGB curves to bull steepen further, with German 2s10s printing a new YTD high of 8.5bps.
  • ECB-dated OIS price 33bps of cuts through the December meeting (i.e. a ~30% implied probability of a 50bp cut), while the front of the Euribor strip outperforms intraday.
  • This, alongside a bid in European equities and downtick in EUR swaption vol has helped 10-year EGB spreads to Bunds to tighten. BTPs lead, with the BTP/Bund spread now at 118bps (-2.5bps today).
  • Earlier, the distribution of inflation expectations in the ECB’s Survey of Professional Forecasters suggested greater confidence in returning to the 2% target over the next few years.
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A dovish Reuters ECB sources piece has helped EUR STIRs and major EGB futures extend the bounce of intraday lows. Bund futures are +22 ticks today at 134.06 (vs a low of 133.67 this morning).

  • Reuters reported that some ECB policymakers wanted to drop guidance that rates would be "sufficiently restrictive for as long as necessary" at the October meeting, though the idea did not gain traction.
  • The subsequent dovish repricing in EUR STIRs has helped EGB curves to bull steepen further, with German 2s10s printing a new YTD high of 8.5bps.
  • ECB-dated OIS price 33bps of cuts through the December meeting (i.e. a ~30% implied probability of a 50bp cut), while the front of the Euribor strip outperforms intraday.
  • This, alongside a bid in European equities and downtick in EUR swaption vol has helped 10-year EGB spreads to Bunds to tighten. BTPs lead, with the BTP/Bund spread now at 118bps (-2.5bps today).
  • Earlier, the distribution of inflation expectations in the ECB’s Survey of Professional Forecasters suggested greater confidence in returning to the 2% target over the next few years.