Traders stick with rate-hike bets as markets set sights on new-look ECB
TLT•Traders maintained bets on a December European Central Bank rate hike after the ECB held rates steady. Markets priced in about a 75% chance of a 25-basis-point increase in December and at least one further move next year.
1. Rate bets persist
The European Central Bank held rates steady on Thursday, while traders maintained bets on a year-end rate hike. Markets priced in about a 75% chance of a 25-basis-point increase in December and at least one further move next year.
2. Leadership transition ahead
President Christine Lagarde said she would step down in February. The ECB is also set to replace Vice President Isabel Schnabel and Chief Economist Philip Lane next year. Lagarde said the increased magnitude and duration of the energy shock were likely to drive up inflation and undermine growth.
3. Bond markets in focus
Germany’s 10-year yield was down 3 basis points at 3.35%, while France’s 10-year yield was down around 1 basis point at 4.9%. The spread between French and German borrowing costs widened to around 155 basis points. Investors have become increasingly uneasy about France’s debt burden and uncertain fiscal outlook.
