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Rate Cut Pricing Pulls Back Slightly Following Modest ECB Pushback

STIR

ECB-dated OIS contracts have slightly pared back rate cut bets as post-meeting ECB-speak has attempted to push back on dovish market rate cut pricing.

  • However, there are still 147bps of cuts priced through 2024 (versus a dovish cycle extreme on 159bps seen Wednesday).
  • Late Thursday saw Bloomberg ECB sources suggest that the ECB "was largely united on seeing rate cuts later than market bets". Estonian CB Governor Muller and Nagel came down in on the hawkish side during the first round of post-meeting comments (as they normally do), citing upside risks to inflation.
  • However, the latest comments from Villeroy were more optimistic, noting that the next ECB move should be a cut barring any surprises (in line with his dovish leanings and pre-meeting comments).
  • The post-Euribor settlement downtick in global core FI markets has fed through to the Euribor strip, which is flat to -5.5 ticks lower through the Blues vs yesterday's settlement levels.
  • Today's docket is highlighted by a raft of further ECB-speak alongside the December flash PMIs.
Meeting Date ESTR ECB-Dated OIS (%)Difference Vs. Current Effective ESTR Rate (bp)
Jan-243.882-2.5
Mar-243.765-14.2
Apr-243.550-35.7
Jun-243.236-67.2
Jul-242.969-93.8
Sep-242.769-113.8
Oct-242.605-130.2
Dec-242.440-146.7
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