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STIR: ESTR Forward Curve Returns To March 13 Position, Severe Tail Risks Decline
The reaction to the temporary US-Iran ceasefire deal sees the ESTR forward curve roughly return to its March 13 closing position. While we are well off hawkish extremes (1y1y now at 2.47% vs 2.72% at yesterday’s close), the market is still pricing in some policy reaction from the ECB – reflecting the potential fragility of the deal and the impact of the Strait of Hormuz closure so far.
- ECB-dated OIS price just over 50bps of hikes through year-end. Pricing thus remains consistent with President Lagarde’s “measured adjustment” scenario outlined at the end of March (which we think could reflect 1-3 hikes over the coming months).
- We wrote last week that Euribor options had assigned a greater risk of a “severe” scenario (i.e. more than 3x25bp hikes) than a “no-hike” scenario. Overnight developments have reduced the tail risks associated with the “severe” scenario, allowing outright implied rates to fall.
- Euribor futures are +16.5 to +33.5 ticks through the blues, led by the back of the whites/front of the reds.
- Sensitivity to headline flow will likely remain acute. Meanwhile, ECB officials will still be focused on April survey data over the coming weeks to assess the impact of the last 6-weeks of conflict.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Apr-26 | 2.010 | 7.9 |
| Jun-26 | 2.177 | 24.6 |
| Jul-26 | 2.298 | 36.7 |
| Sep-26 | 2.414 | 48.3 |
| Oct-26 | 2.448 | 51.7 |
| Dec-26 | 2.462 | 53.1 |
| Jan-27 | 2.468 | 53.7 |
| Mar-27 | 2.481 | 55.0 |
| Apr-27 | 2.488 | 55.7 |
| Source: MNI/Bloomberg Finance L.P. | ||
BONDS: Gilt/Bund Spread Through Support Levels
The 10-Year gilt/Bund spread trades through the March 17 close (178.80bp), narrowing as gilts continue to exhibit a higher beta to risk sentiment surrounding Iran.
- Expect geopolitical and cross-market matters to continue to dominate in the immediate term, with heightened sensitivity to headlines in the lead up the U.S.-Iran discussions, set to start on Friday.
- The 38.2% retracement of the January-March widening (178.27bp, based on closing levels) has also been breached, with the 50% retracement of the same move (173.09bp) protecting the March 10 closing level (171.72bp).
Fig. 1: UK/Germany 10-Year Yield Spread (bp)
Source: MNI - Market News/Bloomberg Finance L.P.
SILVER TECHS: Pierces Resistance At The 50-Day EMA
- RES 4: $107.341 - 76.4% retracement of the Jan 29 - Mar 23 sell-off
- RES 3: $97.804 - High Mar 2
- RES 2: $90.015 - High Mar 10
- RES 1: $77.574/644 - 50-day EMA / Intraday high
- PRICE: $77.088 @ 08:37 BST Apr 8
- SUP 1: $61.007 - Low Mar 23 and the bear trigger
- SUP 2: $60.000 - Round number support
- SUP 3: $56.496 - Low Dec 4 ‘25
- SUP 4: $53.345 - Low Nov 28 ‘25
A bear cycle in Silver remains intact and recent gains appear corrective. The breach of $64.098, the Feb 6 low and bear trigger, reinforces a bear theme. A clear break of this level would confirm a resumption of the M/T downward cycle, plus open the $60.00 handle and below. Key resistance is at $97.804, the Mar 2 high. Initial firm resistance is $77.574, the 50-day EMA. It has been pierced, a clear break of it would signal scope for a stronger retracement.
