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STIR: Dovish Repricing in EUR STIRs Post Flash PMIs

STIR
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The weaker-than-expected September flash PMIs have driven a dovish repricing in ECB-dated OIS, with 10bps of cuts now priced through the October meeting (vs 5bps this morning). Year-end implied cut expectations have risen to 43bps (vs 38bps pre-data). 

  • The PMIs signalled weak developments in output and new orders as well as softening inflationary pressures.
  • While we think an October cut remains unlikely on balance, further weak growth signals may increase pressure on the ECB to move at a faster-than-quarterly pace next year.
  • Such a scenario is already priced into ECB-dated OIS.
  • Euribor futures are +6.5 to +11.5 ticks through the blues, with the back of the whites leading the rally.

 

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The weaker-than-expected September flash PMIs have driven a dovish repricing in ECB-dated OIS, with 10bps of cuts now priced through the October meeting (vs 5bps this morning). Year-end implied cut expectations have risen to 43bps (vs 38bps pre-data). 

  • The PMIs signalled weak developments in output and new orders as well as softening inflationary pressures.
  • While we think an October cut remains unlikely on balance, further weak growth signals may increase pressure on the ECB to move at a faster-than-quarterly pace next year.
  • Such a scenario is already priced into ECB-dated OIS.
  • Euribor futures are +6.5 to +11.5 ticks through the blues, with the back of the whites leading the rally.

 

Keep reading...Show less