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EUR rates: pricing 2023 ECB hikes
Large rate moves are driven by the pricing of ECB hikes in 2023. The ECB narrative is important: normalisation or tightening? Normalisation would imply peak rates is close. Markets trade the inflation theme and is vulnerable to core surprises. Risk on! At least it lasted for a couple of days. The 10y EUR swap rate is down 25bp from the peak last week despite being up today and the front has moved down even faster. The curve out to 10Y is still driven almost one-to-one by the front, while convexity is driving 10s30s. charts ECB pricing for 2022 has changed somewhat, but markets are still looking for 67bp at the 27 ... (full story)