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STIR: 60% Implied Probability of Oct Cut At Odds With Recent Speaker Rhetoric

STIR
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ECB-dated OIS continue to price a 60% implied probability of a 25bp cut at the October meeting, up from around 20% at the start of this week. Current pricing is seemingly at odds with recent Governing Council rhetoric and the MNI Policy Team’s latest interview with an ex-Board member.

  • The weaker-than-expected flash PMIs on Monday spurred the initial dovish repricing, which extended further yesterday.
  • The hawkish-leaning Knot said that he expects gradual interest rate cuts through H1 2025, but did not comment on specific meetings.
  • Knot previously said that he was “more or less fine with market expectations of further cuts”, but this was prior to this week’s deepening of cut expectations.
  • OIS price 48bps of cuts through year-end and 145bps through the June 2025 meeting.
  • Euribor futures are flat to -1.5 ticks through the blues. YTD highs through to ERZ8 generally remain intact despite this week’s aggressive rally. 

 

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ECB-dated OIS continue to price a 60% implied probability of a 25bp cut at the October meeting, up from around 20% at the start of this week. Current pricing is seemingly at odds with recent Governing Council rhetoric and the MNI Policy Team’s latest interview with an ex-Board member.

  • The weaker-than-expected flash PMIs on Monday spurred the initial dovish repricing, which extended further yesterday.
  • The hawkish-leaning Knot said that he expects gradual interest rate cuts through H1 2025, but did not comment on specific meetings.
  • Knot previously said that he was “more or less fine with market expectations of further cuts”, but this was prior to this week’s deepening of cut expectations.
  • OIS price 48bps of cuts through year-end and 145bps through the June 2025 meeting.
  • Euribor futures are flat to -1.5 ticks through the blues. YTD highs through to ERZ8 generally remain intact despite this week’s aggressive rally. 

 

Keep reading...Show less