On Defensive As EGB Spreads Tighten A Little

Euribor futures have ticked lower alongside wider core global FI markets, last -1.5 to -6.0, just off session lows.

• The recent rally in the likes of ERZ4 & ERZ5 stopped shy of mid-May highs.
• ECB-dated OIS is 1-3bp firmer (less dovish) across contracts through mid-’25, showing ~10% odds of a follow up cut at next month’s meeting, 17bp of cuts through the September ECB decision and ~42bp of cuts through year end.
• ECB-speak continues to point to data-dependence, albeit with the likes of chief economist Lane playing down the odds of a cut at the July meeting.
• EGB spreads vs. Bunds have compressed on the day, with some weekend reassurances from French RN leader Le Pen and difficulties within the French political left’s alliance removing some of the French political risk premium from markets.
• German ASWs remain tighter on the day, while French swap spreads are off session tights.
• ECB Executive Board members (Lagarde, de Guindos & Lane) have noted they are attentive when it comes to the French political situation, stressing that the market move is not viewed as disorderly at this stage.

'25 meeting dates are estimated