ECB: 1-year Ahead Inflation Expectations Above Consensus, But Won't Concern ECB
May-28 08:00
ECB 1-year ahead consumer inflation expectations surprisingly rose two tenths to 3.1% in April, going against the median analyst forecast of a softening to 2.8%. However, both 3- and 5-year expectations were steady at 2.5% and 2.1% respectively, so the data shouldn't be of much concern to the ECB.
- Nominal spending growth expectations over the next 12 months increased to 3.7% from 3.4% in March, a finding that was observed across all income groups.
- However, 1-year ahead economic growth expectations became more negative at -1.9% from -1.2% prior.
- On the labour market, consumers expect the future unemployment rate at 10.5% (vs 10.4% in March), still above the perceived current unemployment rate of 9.8%. A reminder that the actual Eurozone unemployment rate is currently 6.2%.
- "Quarterly data showed that unemployed respondents reported a lower expected probability of finding a job over the next three months, falling from 25.1% in January to 21.9% in April. Employed respondents reported that their expected probability of job loss over the next three months decreased to 8.4% in April, from 8.6% in January".
- The unemployment metrics are consistent with yesterday's EC consumer survey, which saw unemployment expectations rise for a second consecutive month.
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STIR: SFRM5 Blocked
Apr-28 07:58
Latest block trade lodged at 08:47:06 London/03:47:06 NY:
- SFRM5 1K lots blocked at 95.885, looks like a seller.
SWAPS: German ASWs A Little Narrower As Bonds Struggle
Apr-28 07:55
The weakness in outright bonds/uptick in European equities leaves German ASWs narrower early this week.
- Spreads vs. 3-month Euribor are 0.2-0.9bp narrower on the day, with Schatz leading the narrowing.
- However, the Schatz spread has failed to breach Friday’s low, while longer dated variants have traded through their respective Friday lows.
- Zooming out, a slightly more conducive risk tone has started to counter the widening theme seen in the second half of March/early April.
- A reminder that early March saw fresh cycle lows for long-dated spreads, following the German “whatever it takes” fiscal moment.
- That was before a lack of an immediate ramp up in issuance and the well-documented increase in global trade/U.S. policy uncertainty weighed on wider risk sentiment, helping drag ASWs away from lows.
- The impending, meaningful uptick in German issuance should continue to play into long end ASW spread dynamics over the medium-term (it should move back to the fore in H225/H126), although positioning and swings in broader risk appetite need to be accounted for as well.
SNB: Tweak to Threshold Factor is Neutral for MonPol Stance
Apr-28 07:49
SNB adjusts the remuneration of sight deposits, lowering the threshold factor from 20 to 18, effective as of 1st June 2025.
- This is considered neutral for monetary policy purposes, as it offsets increases to minimum reserve requirements.
Full SNB release here.
- What this effectively means is that more sight deposits are remunerated at a discount to the the SNB policy rate (rather than at the policy rate).
- The SNB is conducting this move in order to ensure monpol remains effective and the transmission mechanism isn't hampered by minimum reserve requirements rising (which they're expected to continue to do over the coming three years).
- The move follows recent previous adjustments to reduce the threshold factor that were implemented in October 2024 and February 2025.
- As such, no notable response in EUR/CHF, still below the overnight high of 0.9438.
