STIR: Goldman Sachs: EUR Front-End - Steep For A Reason
May-23 14:38
Goldman Sachs note that “the market prices around 40bp of ECB hikes between Dec ‘25 and Dec ‘27. Our economists forecast one hike over this period and given the below-target pricing of market-based inflation over coming years, market pricing looks relatively steep”.
- However, they go on to highlight that “when we benchmark front-end steepness against our growth and inflation forecasts, we find that the distribution of risks points to front-end steepness at or even above current levels. This is because near-term downside risks to growth, and resulting ECB cuts, are likely to take policy rates to the lower end of neutral estimates, while expectations of future growth remain elevated due to projected fiscal expansion”.
- In Goldman’s view “the inconsistency of a steep front-end vs below-target inflation pricing suggests 5-Year HICP longs offer macro value vs front-end pricing. But it is also a reminder that by our estimates the 1y1y and 2y1y points on the forward curve are not too high, and that, if anything, these are likely to remain the weak points on the EUR forward curve over coming quarters”.
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BONDS: Off Pullback Lows As Crude Softens, U.S. Tariff Reduction Quesitoned
Apr-23 14:31
Core global FI markets are off pullback lows, while equities are off session highs, with a couple of factors at play:
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Apr-23 14:30
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