• It is not an understatement when we say that ECB pricing has come back down to earth. At the peak of the bond/rates market tantrum in June, the cyclical peak in forward pricing for the current business cycle[1] was an ECB deposit rate of about 2.5 percent. At the time of writing, the cyclical peak for ECB forward pricing was slightly more than a percent. Which – by accident or not – happens to be bang in line with our own call. Since the June ECB meeting, we resolutely stuck with a call of 150bps in rate hikes this year. We dared not make forecasts for 2023 because we felt there was nothing to work on to make forecasts that far out. Too much guesswork if you will. In any case, so far, 50bps of our call for 150bps in hikes for 2022 have been realized. We’re certain another 50bps will be realized. But we starting to get doubts about the final 50bps. And especially the last 25bps.

[1] For the purpose of defining the longevity of the business cycle, we looked at forward periods of up to two years ahead. Forward periods of 18 months and 2 years ahead both peaked at 2.5 percent.


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