Nomura says the "markets are now......>

EUROZONE VIEW: Nomura says the "markets are now under-pricing the ECB" and are

entering into a EUR 4y1y-1y1y EONIA steepener at 91bp, target 125bp, stop 76bp,

3m carry/roll at -1.7bp.

- Nomura notes hawkish comments from ECB Governing Council member Ewald Nowotny

and "while not representative of the view of the Governing Council, have brought

this theme into focus. His comments, however, were hawkish as he suggested the

possibility of a hike step greater than 10bp while policy rates are still

sub-zero. 

- Nomura adds Nototny comments highlight the fact that rate hikes will be at

least 10bp in size and serve to remind markets that, while the ECB may start

with a 10bp hike, it may not continue with 10bp hikes. 

- In light of the new trade, Nomura has closed out its EUR2s5s10s fly at current

levels with a 7.3bp profit (after carry).