Euribor Strip Softer On JGB-led FI Weakness; ECB Cut Pricing Holds

The Euribor strip moved lower ahead of the European open as global FI weakness in Asia-Pac hours spilled over into European markets, but weakness has largely retracted following soft German IP data. The Euribor strip now sits flat to -1.5 ticks softer.

• BoJ communique re: exiting negative rates, alongside a weak 30Y auction were the main overnight impetus.
• ECB-dated OIS contracts remain off dovish extremes seen yesterday morning, but continue to price 144bps of cuts by the December 2024 meeting (down from 150bps yesterday), and around 40bps by April 2024.
• Welcoming remarks from the ECB's Holzmann at a conference on "R*" this morning did not cross the wires, while comments in an interview from BdF's Villeroy after hours did not push back on current cut pricing (he noted that "the question of a reduction may arise in 2024, but not now").
• The ECB quiet period ahead of next week's meeting should come into effect today, leaving current pricing to be dictated by data/headline flow and external events until then.