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EURIBOR: Implied Terminal Has Fallen Below 2% Since US Election

EURIBOR
BulletEurozoneFixed Income BulletsMarkets

After reaching a closing high of 2.115% just before the US election, the Euribor-implied terminal rate (indicated by the Z5 contract) has fallen back below 2% through November. The Z5-implied rate is currently 1.855%, a little above last Friday’s post-PMI dovish extreme of 1.780%

  • The Euribor curve has flattened since the election result, with markets pricing a more aggressive ECB easing cycle through next year on the back of possible tariff-related growth concerns.
  • Today’s hawkish leaning interview from ECB Executive Board member Schnabel has driven further flattening.
  • Schnabel’s cautious remarks prompted an unwind of last Friday’s PMI-induced dovish repricing at the short-end, with expectations of a 50bp cut at next month’s meeting scaling back. However, implied rates further out the curve have continued to fall relative to post-PMI levels.
  • The Z4/Z6 calendar spread briefly reached its lowest since October 21 today (-84.5 ticks). Support is seen at the October 16 low of -88.5 ticks.
  • Regional focus turns to the November flash inflation round tomorrow and Friday. MNI’s preview is here.

 

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After reaching a closing high of 2.115% just before the US election, the Euribor-implied terminal rate (indicated by the Z5 contract) has fallen back below 2% through November. The Z5-implied rate is currently 1.855%, a little above last Friday’s post-PMI dovish extreme of 1.780%

  • The Euribor curve has flattened since the election result, with markets pricing a more aggressive ECB easing cycle through next year on the back of possible tariff-related growth concerns.
  • Today’s hawkish leaning interview from ECB Executive Board member Schnabel has driven further flattening.
  • Schnabel’s cautious remarks prompted an unwind of last Friday’s PMI-induced dovish repricing at the short-end, with expectations of a 50bp cut at next month’s meeting scaling back. However, implied rates further out the curve have continued to fall relative to post-PMI levels.
  • The Z4/Z6 calendar spread briefly reached its lowest since October 21 today (-84.5 ticks). Support is seen at the October 16 low of -88.5 ticks.
  • Regional focus turns to the November flash inflation round tomorrow and Friday. MNI’s preview is here.