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Weakness In Reds As Tightening Prospects Back In Focus


Europe short-term rate futures are weaker as perceived Russia-Ukraine risks are faded and central bank tightening prospects come back into focus.

  • Red Euribor futures contracts are underperforming early Wednesday, with Dec23 down 6 ticks and lowest since Feb 15. Still about 12 ticks higher than the Feb 11 low, though. 2022 ECB hike pricing is back up to ~38bp vs ~35bp at Tuesday's close.
  • In the UK, Sonia Reds are also off 5 ticks but Mar22 remains steady after a 50bp BoE hike next month was further priced out Tuesday following Ramsden's comments. Greens and Blues are little changed, while Golds are underperforming (off 6-6.5 ticks).
  • The Dec23 Sonia contract is about 20 ticks higher than the Feb 16 low so plenty of room to run on the downside. OIS is pricing around 142bp of hikes in 2022, up marginally from Weds.
  • Immediate focus will be on BoE TSC testimony at 0930GMT; Tenreyro appears then, and again at 1500GMT.

Source: BBG, MNI

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