GREECE T-BILL AUCTION RESULTS: 26-Week GTB

The ECB’s forward looking wage tracker pointed to negotiated wages excluding one-off payments at 2.575% in Q4 2026, down from 2.693% in the February update. Employee coverage for Q4 2026 rose to 36.3% from 28.5% prior. Wage tracker updates have historically seen upward revisions over time, so this goes against that recent trend. It’s too soon for any Iran-war impacts to be reflected in negotiated wages, but this will be a focus point for the ECB in the months ahead.

• A reminder that negotiated wages are only one subset of total employee compensation. The second non-negotiated wages component is what surprised the ECB’s projection to the upside in Q3 2025 (though Q4 2025 did see a downward surprise).
• The ECB upgraded its Q4 2026 compensation per employee projection up to 3.1% in March, from 2.9% in December.
• In the ECB’s “adverse” alternative scenario for the Iran war, compensation per employee rises to 3.7% in Q4 2026. In the “severe” scenario, compensation is seen at 4.6%.
• The transmission from higher headline inflation, to higher wage demands, to higher services inflation is a key propagation mechanism ECB officials are concerned about. However, our previous work has shown that the labour market is less tight than in 2022, potentially suggesting weaker worker bargaining power. 

• While it is difficult to have much confidence fading front-end hawkish repricing in the current market environment, those believing the ECB is making a “policy mistake” by delivering pre-emptive hikes may look to position for continued flattening in 2027 curves.
• The Euribor implied terminal rate for the anticipated hiking cycle is currently 3.04%, associated with the H7 contract. That’s up from 2.92% at Friday’s settle, 2.60% on March 13 and 2.03% before the Iran war started.
• Beyond March 2027, the Euribor curve starts to price in an unwind of these hikes, with the H7/Z7 spread currently at -24.5 ticks. This reflects the negative growth impact of both sharp rate hikes and the energy price shock itself.
• The memories of 2022 mean the bar to ECB hikes in the face of an energy supply shock is lower than before. However, the differing demand/labour market backdrop in 2026 could mean the risk of second round effects is smaller than four years ago.
• That would work against the hawkish assumptions embedded in the ECB’s March alternative scenarios, which “incorporate stronger indirect and second-round inflation effects than those implied by standard model-based elasticities in order to account for non-linearities in the transmission of large inflationary shocks to prices and wages, such as those seen during the 2021-22 energy crisis”

Latest block trade lodged at 08:30:28 London/04:30:28 NY:

• TYM6 9.6K lots blocked at 110-05, looks like a seller. DV01 ~$628K.