September 12, 2024 15:17 GMT
STIR: ECB Pricing Still More Aggressive Than Once-Per-Quarter Baseline
STIR
Hawkish adjustments in ECB pricing extend a little further, but near-term market pricing of cuts remains more aggressive than the once-per-quarter preference held by at least several GC members.
- What’s more, President Lagarde didn’t seem in a particular rush to cut rates again, exhibiting little worry when it came to downside risks to the Bank’s central GDP growth scenario.
- Elsewhere, some of Lagarde's comments on wages could be read as hawkish.
- ECB-dated OIS prices around 3.5x 25bp cuts over the next 4 meetings, with ~5bp of cuts priced for the October meeting.
- That compares to ~8bp cuts for October and ~91bp through March running into today's decision (based on the assumption that today’s cut would be delivered).
- The Eurozone would probably have to experience a deeper slowdown in growth than the ECB currently envisages to match market pricing over the next few meetings.
- Over on the Euribor strip, ERZ4/Z5 is 2bp off yesterday’s cycle lows, last -111bp, while ERH5/H6 support (at the July lows) remains intact.
ECB Meeting |
€STR ECB-Dated OIS (%)
Difference Vs. Cut-Adjusted Effective €STR Rate (bp)
Oct-24
3.363
-5.2
Dec-24
3.085
-32.9
Jan-25
2.864
-55.0
Mar-25
2.552
-86.2
Apr-25
2.326
-108.8
Jun-25
2.108
-130.7
Jul-25
2.011
-140.3
Fig. 1: Euribor Z4/Z5 & H6/H6 Spreads
![](https://media.marketnews.com/Euriborspreads120924_4ab6158ee7.jpg)
Source: MNI - Market News/Bloomberg
Keep reading...Show less
180 words