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STIR: ERZ4 Through Last Week’s Highs

STIR
BulletMarketsFixed Income Bullets

An uptick in the front end of the Euribor strip as ERZ4 clears last week’s highs.

  • No overt fundamental drivers noted and the contract trades back from fresh session highs of 97.240 to 97.225, pointing to a technical-driven move.
  • Over half the volume seen over the last 25 minutes crossed at 97.220 (with 16.7K  lifted at that level).
  • Dec ECB-dated OIS pricing 31.5bp of cuts for that meeting vs. less than 30bp at one stage this morning.
  • Impact of incoming U.S. President Trump’s preferred trade policies seen as a growth headwind for Europe/dovish catalyst for the ECB, keeping EUR implied rates much more dovish than what is seen in the U.S. & UK, despite the obvious inflationary risks.
  • This is further aided by the ECB’s historical sensitivity to growth shocks.
  • Fresh upside impetus in ERZ4 would target the October 24 high 97.280.

Fig. 1: Euribor Dec '24 Futures (ERZ4)

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An uptick in the front end of the Euribor strip as ERZ4 clears last week’s highs.

  • No overt fundamental drivers noted and the contract trades back from fresh session highs of 97.240 to 97.225, pointing to a technical-driven move.
  • Over half the volume seen over the last 25 minutes crossed at 97.220 (with 16.7K  lifted at that level).
  • Dec ECB-dated OIS pricing 31.5bp of cuts for that meeting vs. less than 30bp at one stage this morning.
  • Impact of incoming U.S. President Trump’s preferred trade policies seen as a growth headwind for Europe/dovish catalyst for the ECB, keeping EUR implied rates much more dovish than what is seen in the U.S. & UK, despite the obvious inflationary risks.
  • This is further aided by the ECB’s historical sensitivity to growth shocks.
  • Fresh upside impetus in ERZ4 would target the October 24 high 97.280.

Fig. 1: Euribor Dec '24 Futures (ERZ4)

Keep reading...Show less