SARON Futures Pressured By Overnight Comments From Jordan

Overnight comments from SNB Chair Jordan leave SARON futures weaker while core global STIRs are generally flat to a little firmer.

• SARON futures last print unchanged to -5.5, with most contracts a little off session lows.
• Similarly, the CHF government bond curve has bear flattened, while broader core global FI yields have edged lower.
• Jordan identified a “small” upward risk to the SNB’s inflation forecast, while noting that there are reasons to believe that the natural rate of interest has increased somewhat or might rise over the coming years.
• Elsewhere, Jordan stated that if upside risks to inflation do materialise then it would most likely result in a weaker CHF, which could be countered via selling other currencies.
• SNB-dated OIS shows ~9bp of cuts through the June meeting (vs. ~12bp at yesterday’s close), while December meeting pricing shows ~20bp of cumulative easing (vs. ~25bp at yesterday’s close).
• Jordan’s comments have introduced some hawkish risks to the prevailing dovish assessment of the SNB.
• A reminder that the SNB was the first mover when it came to rate cuts amongst G10 central banks.
• We also saw firmer-than-expected Swiss Q1 Q/Q GDP data, although the Y/Y reading was a touch softer than expected, even with modest downside revisions in the dataset, likely limiting the net reaction.