EUROPEAN INFLATION: French CPI Inflation Momentum Eases Further
French final November HICP inflation was unrevised from the flash print on a rounded basis at 1.7% Y/Y (vs 1.59% in October). On an unrounded basis, HICP inflation was 1.68% Y/Y, 3 hundredths softer than the flash reading of 1.71% Y/Y. CPI inflation was also unrevised from flash at 1.3% Y/Y (vs 1.2% in October). On a unrounded basis it was 8 hundredths below flash at 1.26% Y/Y (vs 1.34% flash, 1.23% prior).
- Core CPI rose marginally to 1.5% Y/Y (vs 1.4% in October).
- Services was revised down 2 tenths from flash to 2.3% Y/Y (2.3% in Oct) while core services rose to 2.8% Y/Y from 2.6% Y/Y in Oct (there is no flash for that series).
- The broad "manufactured products" index was revised down a tenth from the flash to -0.3% Y/Y (-0.2% Y/Y in Oct). Core manufactured products came in at -0.2% Y/Y (-0.2% Y/Y in Oct).
- Energy contributed to the Y/Y increase between October and November; it was unrevised from the flash at -0.7% Y/Y (-2.0% Y/Y in Oct).
- INSEE’s seasonally adjusted CPI series highlights further easing headline inflation momentum. The 3m/3m seasonally adjusted annualised rate fell to -0.71% in November, the lowest since June 2020.
- There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in November (35% vs 36% prior) although the proportion with annual inflation rates above 6% rose marginally (11% vs 10% prior) - after remaining at 10% for four consecutive months.
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STIR: SOFR/Euribor Dec ’25 Spread At Widest Level Since Early ’21
The implied rate differential between SOFR & Euribor Dec ’25 (SFRZ5 - ERZ5) contracts has widened by ~118bp since the September closing low.
- The spread now sits at the widest level seen since early ’21, at 203bp.
- The move has been driven by the U.S. short end trading off the inflationary dynamics provided by incoming President Trump’s policy preferences.
- Meanwhile, Trump’s election victory has had a dovish impact on the EUR short end, via growth expectations.
- Today’s U.S. CPI data will be key for the short-term direction of the spread, with the USD short end pricing 68bp of cuts through December ’25 vs. ~120bp at the end of October.
Fig. 1: SOFR/Euribor Dec '25 Futures Spread (SFRZ5 - ERZ5)
Source: MNI - Market News/Bloomberg
RIKSBANK: November Minutes Due at 0830GMT/0930CET
The Riksbank’s November meeting minutes are due at 0830GMT/0930CET. Focus will be on (1) to what extent last week’s unanimous 50bp cut was a close call for individual members, (2) whether there is scope for a sequential 50bp cut in December and (3) potential commentary around the US election result.
- MNI’s full review of the November decision is here.
- SEK trades a little weaker against the USD and EUR this morning, while NOKSEK is little changed.
- NOKSEK has traded in a tight 51 pip range since last Friday, hovering around the August 16 high at 0.9842. First resistance is the July 30 high at 0.9901.
BUNDS: /SWAPS: Commerzbank Extend Long End ASW Tighteners
Commerzbank note that “overnight repos are a beacon of stability and term indications are also calming down - underscoring the fundamental re-pricing of collateral risk premiums as key for ASW-moves.”
- They go on to write “although most swap spreads are trading at historic lows, as we had anticipated, we doubt that the search for the ‘fair’ clearing price of free-floating, unbounded public debt vs. ‘fiscal risk-free’ OIS curves is complete.”
- As such, they “extend (long end) ASW shorts after the 0bp target of 10-Year Bunds vs. 6-month Euribor was hit.”
