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Rate Cut Expectations Hold Steady Following This Morning's Extension

STIR

ECB-dated OIS contracts sit broadly in line with levels seen through the European morning, with dovish ECB-speak the key driver of today's extension in rate cut expectations.

  • There are currently almost 147bps of rate cuts priced through 2024 (vs today's dovish extreme of just over 150bps).
  • Dovish impulses began following weekend comments from BdF's Villeroy, who noted "everything will be open at our next meetings", allowing the first full 25bp cut to once again be priced through the April meeting.
  • These comments were supported by the Bank of Portugal's Centeno, who struck a familiarly dovish tone, while Vice President de Guindos was more balanced with a similar rhetoric to last week's ECB presser.
  • Tomorrow sees the the start of the January flash inflation round, with Spain reporting at 0800GMT/0900CET. There will also be interest in the flash Q4 '23 GDP prints across the region.

Meeting Date ESTR ECB-Dated OIS (%)Difference Vs. Current Effective ESTR Rate (bp)
Mar-243.840-6.40
Apr-243.651-25.3
Jun-243.347-55.7
Jul-243.087-81.7
Sep-242.827-107.7
Oct-242.633-127.1
Dec-242.439-146.5
Jan-252.285-161.9
Source: MNI/Bloomberg
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