Rates Spark: Can Everything Align For The Euro Hawks?
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ING Economic and Financial Analysis4.95K FollowersFollow5ShareSavePlay(4min)CommentsSummaryThe hawkish repricing this week in euro rates was supported by very positive market sentiment.While we agree with higher rates from a structural perspective, we could see some of the move fade if investors decide to seek some safety going into Christmas.In the US, we finally have some parity between 10yr SOFR and 3mth SOFR, and that spread should widen ahead. dem10/iStock via Getty Images By Michiel Tukker, Senior European Rates Strategist and Padhraic Garvey, CFA, Regional Head of Research, Americas Market euphoria may not help the hawks through Christmas The sudden hawkish positioning by euro rate markets this weekThis article was written byING Economic and Financial Analysis4.95K FollowersFollowFrom Trump to trade, FX to Brexit, ING’s global economists have it covered. Go to ING.com/THINK to stay a step ahead. We’re sorry we can’t reply to individuals' comments.Content disclaimer: The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.This publication has been prepared by ING solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. For our full disclaimer please click here.Quick InsightsWhat could challenge the current hawkish stance in euro rates markets?Any deterioration in growth, inflation undershooting ECB projections, or geopolitical surprises could prompt a reversal of the recent hawkish positioning.How are market expectations shifting regarding the ECB's reaction function?Markets now anticipate the ECB will be less inclined to ease further, as evidenced by real rates driving the repricing rather than inflation expectations.What is the significance of the 10yr SOFR rate exceeding floating rates?With 10yr SOFR above most floating rates, fixed-rate receivers gain positive carry, making swaps to floating less attractive and supporting fixed-rate positions if 10yr SOFR remains elevated.Recommended For You