Rates Spark: Up and Down with Oil

Euro rates are moving in lockstep with oil prices, with 10Y swap rates holding near 3.0% as Brent hovers around $100. Despite large daily swings, falling implied volatility suggests markets are comfortable with current levels.

Key Takeaways

• 1.Euro rates are currently tracking oil price movements closely, with Brent trading around $100/bbl corresponding to a 10Y euro swap rate of 3.0%.
• 2.Market volatility is declining, suggesting a lack of expectation for radical changes in the current rates environment.
• 3.There is a direct correlation between oil price shifts and ECB policy expectations: every $10 change in oil prices impacts ECB tightening pricing by approximately 20bp.

Table of Contents

• Rates Spark: Up and down with oil
• Euro rates well-behaved despite large swings
• Wednesday's events and market views
• Author
• Disclaimer

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