ECB: BofA Go Against The Grain With 50bp Of Cuts In 2027 Base Case
BofA, with already one of the more dovish analyst views on the ECB, have gone a little further in that they look for rate cuts in 2027 at a time when some expect a serious consideration of hikes. We will be publishing a full summary of latest analyst views in due course, but for now our preview found that SocGen and TD Securities saw the earliest hikes (Dec 2026) whilst of those specifying rate hike views, most expect them to start in the middle to second half of 2027.
- Specifically, BofA have taken out the insurance cut they had long expected in Mar 2026 (which they had low conviction in ahead of yesterday’s meeting) and instead add two “proper” cuts of 25bp in Mar and Jun 2027.
- “To be clear, it wasn’t ECB communication that did the trick. It was uneventful, as expected. The message was one of data-dependence, no pre-commitment and a meeting-by-meeting approach”.
- “To be more precise, we hold three convictions on the ECB. First, hike are very unlikely absent a shock in the next two years. Second, the ECB is more likely to cut than not, given the asymmetry of risks we see on both growth and inflation. Third, an insurance cut to finalise the cutting cycle would have made sense now. But that window is closing. So when/if them move, we think they will need to move more than once.”
- “What really did it for us to make two cuts our base case for 1H27 was a reassessment of the growth outlook in Germany, in particular. […] We think fiscal-driven growth could be stronger in 2026 but weaker thereafter”. They see a flatter Euro area growth forecast with 1.2% in 2026 (+0.2pps), 1.3% in 2027 (-0.1pp) whilst core inflation moves to 1.7% in 2017.
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SECURITY: Risks Abound As US Tracks Russian-Flagged Tanker In North Atlantic
A standoff could be developing in the North Atlantic, with at least one Russian naval vessel having been dispatched to guard an empty oil tanker that may be a target for US military interception, according to NYT and WSJ reports. The tanker was formerly known as the Bella 1. Having failed to dock in Venezuela to load oil, it evaded the US blockade of sanctioned vessels and steamed into the Atlantic in December, with its crew repelling US attempts to seize it. Reports suggest the tanker's crew changed the vessel's designation to 'Marinera' and painted a Russian flag on its hull in an effort to claim Moscow's protection.
- Newsweek reports the ship is currently between Iceland and the UK, traversing part of the GIUK gap, a key two-channel naval chokepoint in the North Atlantic.
- The UK Defence Journal reports, "The movement comes as evidence mounts that the United States is preparing a maritime interdiction operation to prevent the tanker reaching a safe haven [...] As Marinera progresses northward, open-source observers have identified a corresponding increase in Western intelligence, surveillance and reconnaissance activity across the North Atlantic.[...] the pattern and timing of these movements closely match known requirements for a compliant or non-compliant maritime boarding operation."
- The seizure of the Skipper tanker off the coast of Venezuela in December passed off relatively smoothly (albeit as an early indicator of US intentions towards Venezuela). However, a potential boarding operation in the North Atlantic on a nominally Russian-flagged tanker, with the reported close proximity of Russian naval vessel/vessels, presents a much higher risk of conflict escalation.
GREECE T-BILL AUCTION RESULTS: 13-Week GTB
| Type | 13-week GTB |
| Maturity | Apr 14, 2026 |
| Amount | E400mln |
| Target | E400mln |
| Previous | E500mln |
| Avg yield | 2.01% |
| Previous | 1.72% |
| Bid-to-cover | 1.80x |
| Previous | 2.36x |
| Previous date | Oct 29, 2025 |
GILT AUCTION RESULTS: Solid 4.125% Mar-31 Gilt auction
- The bid-to-cover ratio of 3.50x was above December’s 3.23x, November’s 3.01x and October’s 2.83x.
- The 0.2bp tail was in line with December’s re-opening.
- Lowest accepted price of 100.660 was above the 100.645 pre-auction mid.
- The secondary price of the Gilt has climbed to a fresh session high of 100.665 since the results were published.
