EM CEEMEA CREDIT: ALTERNATIFBANK $SUB-BMK

Front-end EUR rates maintain a mild hiking bias through next year. However, there is little conviction in a deposit rate move away from 2% at this stage. ECB officials have stressed that policy remains in a “good place”, and Executive Board member Schnabel re-iterated that she does not see a rate move for foreseeable future last week - somewhat tempering the hawkish interpretation of comments made earlier this month.

• ECB-dated OIS price just under 5bps of hikes through December 2026, while the 1y ESTR swap rate is only marginally above the current overnight rate.
• The 1y1y ESTR forward rate embeds a much greater implied probability of a hike in the coming years, but whether this is realised depends crucially on the implementation of and realised growth impulses from Germany’s fiscal expansion.
• Today’s regional calendar is light, while tomorrow sees December flash inflation data from Spain. Analysts expect HICP inflation to fall back to 3.0% Y/Y (vs 3.2% prior).
• Eurozone-wide flash December inflation is not due until January 7. 

Desks calling futures 91.25-35 at the open.

Futures point to upticks at the European & UK cash equity opens:

• Euro Stoxx 50 futures: +0.45%
• DAX futures: +0.33%
• CAC 40 futures: +0.27%
• FTSE MIB futures: +0.21%
• FTSE 100 futures: +0.15%
• SMI futures: +0.17%