Off Lows, Lagarde Stresses Data-dependent Path For ECB

EGBs closely tracked short end pricing around ECB President Lagarde’s post-meeting press conference.

• Bund futures traded to fresh session lows (130.66) on the previously mentioned hawkish newswire headlines, which didn’t provide the full context of an answer given by Lagarde.
• Markets quickly adjusted for the newswire omissions, recovering from hawkish extremes in the process.
• Initial support in Bund futures (130.50) remains untouched, with the contract back to 130.90.
• German yields are 3.5-5.0bp higher across the curve, with the 5- to 7-Year zone leading the weakness.
• Peripheral spreads also hit fresh session wides on that headline, before retracing back to levels seen around the start of the press conference.
• The 10-Year BTP-Bund spread remain tethered to 130bp.
• Subsequent headline flow sees RTRS sources suggesting Holzmann (a known hawk) was the lone hawkish dissenter at today’s decision, arguing for unchanged rates, owing to the increase in inflation projections.
• Ultimately, today’s ECB decision provided little insight surrounding the future path for monetary policy, as Lagarde underscored the Bank’s data-dependent stance, albeit pointing to the likelihood that the ECB has started the “dialling back” of restriction phase.