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STIR: SONIA/Euribor ’25 Spreads Eye All-Time Highs Following PMIs

STIR
BulletMarketsFixed Income BulletsForeign Exchange Bullets

As intimated in our recent two-part ECB-BoE bullet, we aren’t surprised to see SONIA/Euribor spreads move wider in the wake of this morning’s PMI data.

  • The ECB’s focus on downside risks to growth vs. the BoE’s continued focus on fighting inflation has driven further divergence between SONIA & Euribor pricing in recent months.
  • This widening gathered further steam following the UK Budget, Trump’s election victory (on perceptions surrounding heightened EUR economic sensitivity to U.S. tariffs) and escalation in the Russia-Ukraine war.
  • The SONIA/Euribor June ’25 (M5) & December (Z5) spreads have already registered fresh all-time highs this month.
  • We wouldn’t be surprised to see a retest/break of those levels in the weeks ahead, particularly with both operating within 10bp of their respective closing highs.

Fig. 1: SONIA/Euribor June ’25 (M5) & December ’25 (Z5) Spreads

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As intimated in our recent two-part ECB-BoE bullet, we aren’t surprised to see SONIA/Euribor spreads move wider in the wake of this morning’s PMI data.

  • The ECB’s focus on downside risks to growth vs. the BoE’s continued focus on fighting inflation has driven further divergence between SONIA & Euribor pricing in recent months.
  • This widening gathered further steam following the UK Budget, Trump’s election victory (on perceptions surrounding heightened EUR economic sensitivity to U.S. tariffs) and escalation in the Russia-Ukraine war.
  • The SONIA/Euribor June ’25 (M5) & December (Z5) spreads have already registered fresh all-time highs this month.
  • We wouldn’t be surprised to see a retest/break of those levels in the weeks ahead, particularly with both operating within 10bp of their respective closing highs.

Fig. 1: SONIA/Euribor June ’25 (M5) & December ’25 (Z5) Spreads

Keep reading...Show less