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STIR: PMI-Induced Dovish Repricing Holds In ECB-dated OIS

STIR
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ECB-dated OIS have held onto the majority of this morning’s PMI-induced dovish repricing, with 42bps of easing currently priced through year-end (vs 38bps at today’s open).

  • The implied probability of a 25bp in October is now almost 40%, up from ~20% this morning.
  • 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 +4.0 to +11.0 ticks through the blues, with the back of the whites/front of the reds leading the rally.
  • The ERZ4/Z5 spread currently trades at -106 ticks, still above the cycle low of -113 ticks seen in the run-up to the ECB’s September meeting.

 

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ECB-dated OIS have held onto the majority of this morning’s PMI-induced dovish repricing, with 42bps of easing currently priced through year-end (vs 38bps at today’s open).

  • The implied probability of a 25bp in October is now almost 40%, up from ~20% this morning.
  • 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 +4.0 to +11.0 ticks through the blues, with the back of the whites/front of the reds leading the rally.
  • The ERZ4/Z5 spread currently trades at -106 ticks, still above the cycle low of -113 ticks seen in the run-up to the ECB’s September meeting.

 

Keep reading...Show less