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STIR: More ERH5/M5 Flattening Following German State-level CPIs

STIR
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Dovish repricing in EUR rates following the softer-than-expected German state-level CPI readings. Euribor futures are now +4.0 to +9.0 ticks through the blues, with the back of the whites/front of the reds leading the rally.

  • Yesterday, we highlighted notably flattening in the ERH5/M5 spread, as markets continued to position for a more aggressive ECB easing cycle in Q2. This flattening has extended following the German data, with the spread down another 3.5 ticks today to -26.0 ticks, the lowest since December 2024.
  • In ECB-dated OIS, there are now 81bps of cuts priced through year-end (vs ~75bps pre-data).
  • 26bps of cuts are priced through the March gathering, with another 36bps of easing priced into the April and June decisions (up from 30bps last week).
  • As such, there remains scope for further dovish repricing in the April and June meetings, for those expecting the ECB to deliver sequential 25bp cuts throughout the first half of this year.  

 

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Dovish repricing in EUR rates following the softer-than-expected German state-level CPI readings. Euribor futures are now +4.0 to +9.0 ticks through the blues, with the back of the whites/front of the reds leading the rally.

  • Yesterday, we highlighted notably flattening in the ERH5/M5 spread, as markets continued to position for a more aggressive ECB easing cycle in Q2. This flattening has extended following the German data, with the spread down another 3.5 ticks today to -26.0 ticks, the lowest since December 2024.
  • In ECB-dated OIS, there are now 81bps of cuts priced through year-end (vs ~75bps pre-data).
  • 26bps of cuts are priced through the March gathering, with another 36bps of easing priced into the April and June decisions (up from 30bps last week).
  • As such, there remains scope for further dovish repricing in the April and June meetings, for those expecting the ECB to deliver sequential 25bp cuts throughout the first half of this year.  

 

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