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STIR: Euribor Futures Supported By Post-Settlement Rally In US Rates

STIR
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Euribor futures are +1.0 to +5.0 ticks through the blues, supported by the post-settlement rally in the US short end as media articles (WSJ/FT) suggested a 25bps versus 50bps Fed cut was a close call.

  • However, the rhetoric within the reports does not suggest the Fed is trying to “guide” markets within the media blackout, with a 25bps cut remaining the base case amongst analysts.
  • The ECB retained it’s “data-dependent and meeting-by-meeting approach" at yesterday’s meeting, prompting a modest unwind of near-term cut pricing.
  • ECB-dated OIS price 6.5bps of easing through the October 17 meeting (vs ~8bps before the September decision) and 36bps through year-end (vs ~37bps pre-decision) – still a little more dovish than the once-per-quarter preference held by at least several GC members.
  • Several ECB policymakers (Nagel, Simkus and Rehn) have spoken this morning, but haven’t delivered any big surprises.
  • Focus remains on implied cut pricing further out. We have previously highlighted interest in Euribor flatteners (e.g. ERZ4 calendar spreads vs the strip all the way to H7).
  • The July low in the ERH5/H6 spread remains intact after a ~11 point rally through September.
Meeting DateESTR ECB-Dated OIS (%)Difference Vs. Current Cut-adjusted Effective ESTR Rate (bp)
Oct-243.348-6.6
Dec-243.051-36.3
Jan-252.821-59.4
Mar-252.517-89.7
Apr-252.295-112.0
Jun-252.079-133.5
Jul-251.974-144.0
Source: MNI/Bloomberg.
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Euribor futures are +1.0 to +5.0 ticks through the blues, supported by the post-settlement rally in the US short end as media articles (WSJ/FT) suggested a 25bps versus 50bps Fed cut was a close call.

  • However, the rhetoric within the reports does not suggest the Fed is trying to “guide” markets within the media blackout, with a 25bps cut remaining the base case amongst analysts.
  • The ECB retained it’s “data-dependent and meeting-by-meeting approach" at yesterday’s meeting, prompting a modest unwind of near-term cut pricing.
  • ECB-dated OIS price 6.5bps of easing through the October 17 meeting (vs ~8bps before the September decision) and 36bps through year-end (vs ~37bps pre-decision) – still a little more dovish than the once-per-quarter preference held by at least several GC members.
  • Several ECB policymakers (Nagel, Simkus and Rehn) have spoken this morning, but haven’t delivered any big surprises.
  • Focus remains on implied cut pricing further out. We have previously highlighted interest in Euribor flatteners (e.g. ERZ4 calendar spreads vs the strip all the way to H7).
  • The July low in the ERH5/H6 spread remains intact after a ~11 point rally through September.
Meeting DateESTR ECB-Dated OIS (%)Difference Vs. Current Cut-adjusted Effective ESTR Rate (bp)
Oct-243.348-6.6
Dec-243.051-36.3
Jan-252.821-59.4
Mar-252.517-89.7
Apr-252.295-112.0
Jun-252.079-133.5
Jul-251.974-144.0
Source: MNI/Bloomberg.