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STIR: Year-end ECB Implied Rates Rise 4bps Following French/German Flash PMIs

STIR
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Year-end ECB implied rates have risen almost 4bps following the French and German January flash PMIs, with OIS now pricing 91bps of easing through December.

  • The front end of the curve is more anchored, with 47bps of cuts priced through March (vs 48bps this morning). This is unsurprising, with policymakers not pushing back against (and in some cases endorsing) 25bp cuts in January and March in recent weeks.
  • There are 15bps of sequential cuts priced through the April and June meetings at typing. Those looking for a more aggressive ECB easing cycle in the first half of this year (despite the stronger Jan flash PMIs) may still view implied cuts as too low in this segment of the curve.
  • Euribor futures are -1.5 to -4.0 ticks through the blues, with the back of the whites/front of the reds under the most pressure.
  • Sentiment was generally stronger in the Eurozone excluding France and Germany than the two largest economies through last year. The Eurozone-wide flash PMI at 0900GMT will provide more colour on that front.

 

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Year-end ECB implied rates have risen almost 4bps following the French and German January flash PMIs, with OIS now pricing 91bps of easing through December.

  • The front end of the curve is more anchored, with 47bps of cuts priced through March (vs 48bps this morning). This is unsurprising, with policymakers not pushing back against (and in some cases endorsing) 25bp cuts in January and March in recent weeks.
  • There are 15bps of sequential cuts priced through the April and June meetings at typing. Those looking for a more aggressive ECB easing cycle in the first half of this year (despite the stronger Jan flash PMIs) may still view implied cuts as too low in this segment of the curve.
  • Euribor futures are -1.5 to -4.0 ticks through the blues, with the back of the whites/front of the reds under the most pressure.
  • Sentiment was generally stronger in the Eurozone excluding France and Germany than the two largest economies through last year. The Eurozone-wide flash PMI at 0900GMT will provide more colour on that front.

 

Keep reading...Show less