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/SWAPS: Commerzbank Flag Some Complications In Inflation Markets

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Commerzbank write “although the ECB remains fixed on cutting in June, Tuesday's flash HICP is hardly comforting when controlling for base effects.”

  • “In addition, markets are focussing on price risks from energy and food prices again with wage pressures well documented by now.”
  • “5y5y € ILS is trading at 2.4% - which coincides with the very long-term average - for the first time in almost 6 months and short-dated break-evens are moving away from 2% again.”
  • “Crucially, longer-dated break-evens have decoupled from y/y services HICP and are back in sync with oil. This complicates a swift break-even reversal as lingering geopolitical risks overcompensate the projected slide in services y/y rates.”
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Commerzbank write “although the ECB remains fixed on cutting in June, Tuesday's flash HICP is hardly comforting when controlling for base effects.”

  • “In addition, markets are focussing on price risks from energy and food prices again with wage pressures well documented by now.”
  • “5y5y € ILS is trading at 2.4% - which coincides with the very long-term average - for the first time in almost 6 months and short-dated break-evens are moving away from 2% again.”
  • “Crucially, longer-dated break-evens have decoupled from y/y services HICP and are back in sync with oil. This complicates a swift break-even reversal as lingering geopolitical risks overcompensate the projected slide in services y/y rates.”