STIR: ERZ5 Has Recovered 14.0 Ticks From Last Wednesday's Low
Feb-27 15:42
Renewed tariff-related growth risks have supported Euribor futures this afternoon, with the strip now +1.0 to +3.5 ticks through the blues. ERZ5 has recovered 14.0 ticks from last Wednesday’s low, which came in the aftermath of a hawkish interview from ECB Executive Board member Schnabel.
- While soft February flash PMI data, tariff concerns and broader risk-off sentiment have supported the recovery in Euribor since last Wednesday, we were surprised by the extent of the hawkish reaction to Schnabel’s interview at the time (as it was largely in line with her usual stance).
- The ESTR forward curve has shifted lower over the last 8 sessions, with the 1y1y rate now back at 1.85% (vs 2.02% at Wednesday’s close).
- ECB-dated OIS price 86bps of easing through year-end, up from 72bps at Wednesday’s close.
- The ECB’s January meeting accounts were not market moving. However, interestingly, ECB officials seemed to play down survey data in its assessment of monetary policy: “The euro area economy had seen some encouraging signs in the January flash PMIs, although it had to be recognised that, in these uncertain times, hard data seemed more important than survey results”.
- German, France and Italy inflation data is back in focus tomorrow, previewed here.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Mar-25 | 2.420 | -24.5 |
| Apr-25 | 2.252 | -41.3 |
| Jun-25 | 2.060 | -60.5 |
| Jul-25 | 1.986 | -67.9 |
| Sep-25 | 1.891 | -77.4 |
| Oct-25 | 1.861 | -80.4 |
| Dec-25 | 1.807 | -85.8 |
| Feb-26 | 1.795 | -87.0 |
| Source: MNI/Bloomberg. | ||
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US DATA: Regional Fed Mfg Surveys Point To Sizeable ISM Mfg Upside Risk
Jan-28 15:37
- The Richmond Fed manufacturing survey rounded out the five regional Fed reports for January, with the five on balance seeing a sequential improvement.
- The Richmond mfg index beat expectations as it increased to -4 in Jan (cons -10) from -10 in Dec for a further improvement away from the low of -21 in September. It’s now the least negative since May.
- New orders painted a broadly similar story, at -4 after -11 although that was its least negative since Oct 2023.
- Looking more broadly, three of the five regional Fed indices saw improvements in January, whilst Kansas held steady for roughly a fourth consecutive month and Empire gave back some of its prior gains.
- Philly clearly stood out though, surging from -10.9 to 44.3 for the highest since the 44.4 in Apr 2021 and before that 1984.
- That biased the unweighted average of the five series firmly higher, rising from -3.9 to +7.4 for its first positive reading since May 2022.
- Taken directly, it points to an ISM manufacturing reading comfortably in the 50s at would be a sizeable beat, currently expected at 48.9 in Jan after 49.2 (released next Monday). However, the localized nature of regional strength suggests caution is needed.
GILT AUCTION PREVIEW: On offer next week
Jan-28 15:33
The DMO has announced it will be looking forward to sell GBP4.25bln of the 4.375% Mar-30 Gilt (ISIN: GB00BSQNRD01) at its auction next Tuesday, February 4.
PIPELINE: Corporate Bond Issuance Update: $2B Arab Republic of Egypt 2Pt Launch
Jan-28 15:22
- Date $MM Issuer (Priced *, Launch #)
- 01/28 $2B Carnival Corp 8NC3
- 01/28 $2B #Arab Republic of Egypt $1.25B 5Y 8.625%a, $750M 8Y 9.45%
- 01/28 $750M #Ziraat Bank 5Y 7.375%
- 01/28 $Benchmark American Express 6NC5 +100a, 6NC5 SOFR, 11NC10 +120a
- 01/28 $Benchmark Toronto-Dominion Bank 3Y +85a, 3Y SOFR, 7Y +105a
- 01/28 $Benchmark Capital One 11NC10 +195a
- 01/28 $Benchmark JPMorgan PerpNC5 7%a
- 01/28 $Benchmark Aircastle 5Y +137.5a
- 01/28 $Benchmark ForteBank 5Y 8%a
