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STIR: Renewed Trump Tariff Threats Extend Day's Euribor Outperformance

STIR
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  • 3-month Euribor futures have lifted 2-2.5 ticks back towards session highs on Trump saying EU tariffs are to be 25% on autos and other things per Bloomberg headlines.
  • It’s been met with a growth-negative reaction in rates despite it broadly being a repeat of previous threats of auto tariffs of “around 25%” which had earlier in the month been accompanied by threats of 25% or higher tariffs on pharmaceutical products (seen relative sensitivities in the bottom chart below).
  • The below charts show clear outperformance for Euribor futures on the day vs US and UK counterparts, but continued prospects of heavy European defense spending and the broader results of the German election have seen sizeable underperformance for both Euribor and Sonia futures vs SOFR since levels shortly ahead of the European close on Friday. 
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  • 3-month Euribor futures have lifted 2-2.5 ticks back towards session highs on Trump saying EU tariffs are to be 25% on autos and other things per Bloomberg headlines.
  • It’s been met with a growth-negative reaction in rates despite it broadly being a repeat of previous threats of auto tariffs of “around 25%” which had earlier in the month been accompanied by threats of 25% or higher tariffs on pharmaceutical products (seen relative sensitivities in the bottom chart below).
  • The below charts show clear outperformance for Euribor futures on the day vs US and UK counterparts, but continued prospects of heavy European defense spending and the broader results of the German election have seen sizeable underperformance for both Euribor and Sonia futures vs SOFR since levels shortly ahead of the European close on Friday. 
image