The over-arching theme in markets this week is rates retreating from frothy rate hike bets following the Bank of England’s about face yesterday and the Reserve Bank of Australia’s guidance this morning that rate hikes are a 2024 story. As a constellation price we did get much stronger than expected rate hikes from the central banks of Poland and Czech Republic, which is keeping rate hike dreams alive.

Overnight we had the hawkish leaning ECB Board Member Schnabel taking a line from President Lagarde’s playbook that a hike next year would be “very unlikely”. Still, OIS continue to price in a rate hike a year from now while Euribor futures still point to a significant tightening of liquidity conditions in the banking system in June of 2022, when the ECB’s TLTRO teaser rate expires.


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