Let’s get the painful stuff out of the way first. On several occasions we have called OIS pricing implying ECB rates lift-off at or before the September Governing Council meeting simply wrong.  We repeated the call last week, pointing out that OIS forward pricing implying tight liquidity conditions and/or rate hike(s) before the start of the November maintenance period are a trading opportunity. But since last week, the market has moved against us. For example, the 6-month forward OIS has increased by a chunky 6bps. Furthermore, if we take the 10-month forward at face value, the market has priced in a 25bps hike plus a significant tightening of liquidity conditions around the last scheduled Governing Council meeting this year:

 

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