Rates Spark: More Repricing Risk at Front End

Falling oil prices have significantly reduced inflation risks, rendering current hawkish market pricing for Fed and ECB rate hikes excessive. Weakening economic growth data suggests that front-end yields are positioned for a downward correction.

Key Takeaways

• 1.Lower oil prices are reducing inflation risks, making front-end rates look vulnerable to a downward repricing.
• 2.US economic growth dynamics are weakening, suggesting that current hawkish Fed rate pricing is excessive.
• 3.ECB hawkish pricing of 30bp of tightening is at risk of being challenged by worsening growth sentiment.

Table of Contents

• Rates Spark: More repricing risk at front end
• The front end looks particularly vulnerable to repricing lower
• Thursday’s events and market views
• Author
• Disclaimer

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