PLN: Zloty Edges Ahead Of EMEA Peers
Jul-26 13:04
EUR/PLN has lost some altitude, while the zloty tops the EMEA pile at typing, despite the absence of notable local catalysts. The Fed's monetary policy decision provides the main risk event today. The pair is probing the water below 4.42 and is approaching key support from 4.4138, which limited losses on Jul 4.
- Poland's 6-Month WIBOR and 3-Month WIBOR have crossed below the NBP's reference rate (6.75%) amid expectations that the central bank will cut interest rates this autumn. That being said, the recent days have seen a slight correction to the implied medium-term NBP outlook, even as 3x6 FRAs have been little changed, while a couple of sell-side desks wrote that the current rate-cut bets seem quite aggressive. The next NBP monetary policy decision is due September 6.
Fig. 1: PLN FRAs
Source: MNI - Market News/Bloomberg
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STIR: ECB Pricing Little Changed On Day, Sintra & CPI Eyed
Jun-26 13:04
ECB-dated OIS is little changed across the strip today, with a 25bp hike at next month’s meeting ~90% priced and a terminal deposit rate of just below 4.00% currently seen.
- Weekend ECB speak saw Vice President de Guindos reiterate the idea that the Bank is moving into the final stretch of its tightening cycle, as he underscored the importance of underlying inflation movements and an awareness of the risk of second-round inflationary impulses.
- Elsewhere, Irish Central Bank Governor Makhlouf stuck with the centre of the ECB, noting that he is not sure what decisions will be taken beyond the Bank’s summer break, along with indicating the likelihood of another 25bp hike in July. Makhlouf told the Irish Independent “I do feel that we're near the top of the ladder. Some others may feel we're further down, but we'll see.”
- The ECB’s annual Sintra forum gets underway this evening. President Lagarde will open the event and the full schedule can be found here.
- Some sell-side desks have questioned the market-moving capability of the event given the stage in the global tightening cycles and the deluge of central bank speak released in recent times.
- Friday’s flash Eurozone CPI data presents the other major focal point for market participants this week.
| ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
| Jul-23 | 3.626 | +22.6 |
| Sep-23 | 3.799 | +39.9 |
| Oct-23 | 3.863 | +46.3 |
| Dec-23 | 3.884 | +48.4 |
| Jan-24 | 3.848 | +44.8 |
| Mar-24 | 3.791 | +39.1 |
| Apr-24 | 3.692 | +29.2 |
FRANCE T-BILL AUCTION RESULTS: 13/20/30/50-week BTFs
Jun-26 12:58
| Type | 13-week BTF | 20-week BTF | 30-week BTF | 50-week BTF |
| Maturity | Sep 27, 2023 | Nov 15, 2023 | Jan 24, 2024 | Jun 12, 2024 |
| Amount | E22.76bln | E1.795bln | E399mln | E1.496bln |
| Target | E2.4-2.8bln | E1.4-1.8bln | E0-0.4bln | E1.1-1.5bln |
| Previous | E2.698bln | E1.5bln | E475mln | E1.755bln |
| Avg yield | 3.431% | 3.532% | 3.551% | 3.623% |
| Previous | 3.387% | 3.499% | 3.485% | 3.605% |
| Bid-to-cover | 0.23x | 2.42x | 5x | 2.83x |
| Previous | 2.17x | 3.38x | 2.63x | 2.2x |
| Previous date | Jun 19, 2023 | Jun 19, 2023 | Jun 19, 2023 | Jun 19, 2023 |
BONDS: Bond and Rate futures stays underpinned
Jun-26 12:53
- This is the lowest traded volumes in TYU3 since at least the 22nd May, with desks on the sidelines.
- Upside in Govies and in Rate futures markets has so far been favoured as investors look for EU inflation to ease.
- The main initial resistance in Bund at 134.95 has held for now.
- TYU3 did test Friday's high, but has lacked traction, printed a 113.16+ high vs 113.15+ on Friday.
- The resistance in TYU3 is at 113.18.
