EU FINANCIALS: UBS € B'mark 5NC4 ; 11NC10 Sr Bail-in - FV

Hawkish repricing in GBP STIRs comes alongside hawkish moves in broader core global FI markets, triggered by the previously covered comments from ECB's Schnabel re: being comfortable with the market pricing a hike as the next move.

• The latest KPMG-REC report on jobs pointed to ongoing slack in the labour market, albeit with hawkish wage signals (see earlier bullet for details). The latter point has factored into this morning's hawkish move.
• BoE-dated OIS still leans heavily towards a December rate cut, pricing 21.5bp of cuts for that meeting.
• Note that 50bp of easing is no longer 100% discounted through the June MPC (~49bp of easing shows across that horizon).
• SONIA futures now flat to -4.0, implied terminal rate pricing to ~3.41% after oscillating between 3.30-3.35% for much of last week.
• SFIZ6 4.0 off the November low (96.550).
• Comments are due from BoE's Taylor (17:30) & Lombardelli (18:30) although the topics of their addresses may limit the scope for comments on monetary policy (see prior bullet).
• Monthly economic activity data is due Friday.

Hawkish-leaning commentary from ECB Executive Board member Schnabel and a solid German October industrial production reading pulls the ESTR 1y1y rate to a 9-month high of 2.07%. Recent momentum leans in favour of further upside in EUR implied rates, and markets should be aware that an ECB hike to 2.25%, while unlikely in the near-term, is a conceivable scenario over a 2-year horizon.

• Schnabel noted that she was “rather comfortable” with market expectations that “the next rate move is going to be a hike, albeit not anytime soon”. Her comments aren’t that surprising – she’s a known hawk and already said on September 2 that "I think the point where central banks around the world start to hike interest rates again may come earlier than many people currently think." She also said she’d be ready to succeed Lagarde as ECB President if asked.
• The remarks are being interpreted as a further signal that another cut is unlikely, viewed alongside sticky (core) inflation data, improving PMIs and a stronger-than-expected Q3 compensation per employee reading.
• Hawkish price action in EUR STIRs over the past two weeks has not been driven by a repricing of inflation expectations. The EUR 5y5y inflation swap is currently at 2.08%, up from 2.05% on November 25 but below the Nov 18 closing high of 2.10% and the June peak of 2.15%. Shorter-dated inflation swaps remain below the 2% target.
• Euribor futures are up to 4.5 ticks lower versus Friday's settlement, led by the green pack. In the calendar spreads, early volume is centred in ERH6/M6 and ERM6/U6., with a steepening bias present.
• ECB-dated OIS now price just 3bps of easing through July 2026. This week’s Eurozone data calendar is fairly quiet, ahead of next week’s busier schedule with December flash PMIs and the ECB decision. 

TYF6 112.50/112.00ps vs 114.50c, sold the ps at 1 in 20k.