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Schnabel Helps Terminal Rate Pricing To Show Above 3.95%

STIR

ECB-dated OIS generally moves higher on Monday, with the direction of travel for core global FI markets and then a recent, hawkish address ( https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230619_1~2c0bdf2422.en.html ) from ECB Executive Board member Schnabel, which warned against the risks of underestimating inflation given recent history, in addition to outlining her preference to err on the side of doing too much vs. too little re: policy tightening, at the fore.

  • That leaves ECB terminal rate pricing just above 3.95% in deposit rate terms, with ~22bp of tightening priced for the July gathering. Messrs Lagarde & Lane have already alluded to the likelihood of another rate hike before the summer break.
  • Elsewhere, Governing Council member Simkus reaffirmed the general view i.e. backing a hike in July but stressing the Bank’s data-dependent stance when it comes to September, as did fellow Governing Council member Kazimir.
ECB Meeting€STR ECB-Dated OIS (%)Difference Vs. Hike-Adjusted €STR Rate (bp)
Jul-233.616+22.2
Sep-233.793+39.9
Oct-233.843+44.9
Dec-233.854+46.0
Jan-243.831+43.7
Mar-243.757+36.3
Apr-243.675+28.1

Note that the above table assumes a 25bp adjustment vs. the most recent €STR overnight rate levels, fully passing through last week’s 25bp ECB rate hike.

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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