STIR: OIS Price 12bps of ECB Easing Through Jul '26 Following Hawkish Presser
With the dust now settled on the September ECB decision and press conference, ECB-dated OIS are back to pricing 12bps of easing through July 2026, 1bp more hawkish than pre-decision levels. The immediate digestion of the policy statement and macroeconomic projections saw OIS price a dovish extreme of 17bps of cuts over the next 10 months, but the tone of President Lagarde’s press conference saw those moves quickly reversed.
- The Oct-Dec OIS fly has steepened 1.6bps on the session, with a cumulative 4.5bps of cuts now priced through year-end (vs 6bps at yesterday’s close).
- There was a very modest dovish reaction to the latest Reuters sources piece, which pointed to the December decision as the next realistic time to debate another cut. Note that Bloomberg traditionally also release a post-meeting sources story around this time.
- Expect regular post-meeting ECBspeak to start rolling in from tomorrow, which will help gauge relative positions of Governing Council members – something Lagarde pushed back on disclosing at today’s press conference.
- Euribor futures are +1.0 (U5, bid following this morning’s fix) to -3.0 ticks (back of whites/reds) versus yesterday’s settlement levels. ERZ6 remains above the 98.000 handle for now.
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Aug14 $1.1590-00(E1.8bln), $1.1625-35(E898mln), $1.1645-50(E1.2bln), $1.1695-00(E4.5bln); Aug15 $1.1590-00(E1.1bln); Aug18 $1.1560(E1.1bln)
- USD/JPY: Aug14 Y147.00-20($1.2bln), Y148.15-30($945mln), Y155.00(Y1.6bln
- GBP/USD: Aug14 $1.2975-00(Gbp1.2bln)
- EUR/GBP: Aug14 Gbp0.8690-05(E1.1bln)
- AUD/USD: Aug14 $0.6600(A$1.3bln)
- USD/CNY: Aug15 Cny7.5000($1.7bln)
US TSYS/OVERNIGHT REPO: SOFR Softens Slightly, Potential Pickup Ahead
Secured rates were a little softer Monday as was broadly expected, with SOFR edging 1bp lower to 4.34%. Other major secured rates and effective Fed funds were unchanged.
- As we noted yesterday, pressure could pick up later in the week on Treasury auction settlements. These include $55B in net cash raised by bills today, and a further $42B on Thursday, followed by $35B in coupon settlements Friday.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.34%, -0.01%, $2796B
* Broad General Collateral Rate (BGCR): 4.33%, no change, $1173B
* Tri-Party General Collateral Rate (TGCR): 4.33%, no change, $1137B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $115B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $263B
US: BLS Commissioner Nominee Antoni Suggests Suspending Monthly Payrolls Report
Fox Business has published an interview with E.J. Antoni in which the White House's nominee as the next Bureau of Labor Statistics commissioner suggests that the monthly Employment Situation (ie nonfarm payrolls) report should be "suspended":
- "Until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data... Major decision-makers from Wall Street to D.C. rely on these numbers, and a lack of confidence in the data has far-reaching consequences."
- He adds: "How on earth are businesses supposed to plan – or how is the Fed supposed to conduct monetary policy – when they don’t know how many jobs are being added or lost in our economy? It’s a serious problem that needs to be fixed immediately."
- This interview was conducted on Monday, before Antoni's nomination by the President. Though it's notable he "told FOX Business that he doesn’t believe the jobs data was intentionally manipulated, as some have suggested, but instead argues that persistent flaws in the Bureau of Labor Statistics' methodology have gone unaddressed."
