Just a very brief overnight day ahead comment before we discuss the strange settlements of the fed funds rate in greater detail. Yesterday we had a shockingly high settlement of ESTR at minus 0.511. This morning it normalized with a settlement of minus 0.542. If one look at past settlements, it turns out that ESTR spikes around the 20th of the month on a quarterly basis for unknown reasons. So, yesterday’s settlement wasn’t a sign of the ECB losing control over its recently introduced unsecured overnight bank borrowing rate. However, the settlement of ESTR has been creeping higher, and in particular the 75% percentile of transactions. Looking ahead, all eyes will be on ECB chief’s Lagarde’s speech at 09:30 CET. It could be the first time she comments on monetary policy since becoming President. Furthermore, Eurozone PMI data out this morning should confirm the slowdown of the region’s economy is bottoming out. Unsurprisingly, the level of the PMI is consistent with GDP growth of about half its potential rate.

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