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Hawkish Warnings From ECB’s Schnabel Apply Fresh, Modest Pressure

EGBS

A hawkish address from ECB Executive Board member Schnabel, which warned against the risks of underestimating inflation given recent history, in addition to outlining her preference to err on the side of doing too much vs. too little re: policy tightening, applies some fresh, albeit modest pressure to EGBs.

  • That allows Bund and BTP futures to look through prior session lows, while ECB terminal rate pricing on the dated-OIS strip nudges higher, nearing 3.95%, incrementally above last week’s closing levels.
  • The German curve had already moved into a state of bear steepening, with the benchmarks running 3-5bp cheaper at typing, after twist steepening earlier in the day.
  • BTPs continue to widen at the 10-Year point, with the spread vs. Bunds +3.5bp, after last week’s notable tightening.
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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