LONDON (MNI) – The EONIA (European Over-Night Index Average) swap
curve is now implying a 1-in-5 chance of a 25-basis point ECB rate cut
by the end of this year after comments from ECB President Mario Draghi
that weren’t as dovish as the market had hoped for.
Ahead of the press conference, EONIA was pricing in a 28% chance of
a 25-bp rate cut.
Speculation of an ECB rate cut had increased following renewed
tensions in the Eurozone peripheral bond market and weak data that
showed a number of EMU countries have officially slipped back into
recession.
EONIA also shows only an 8.0 percent chance that rates will be cut
by 25 basis points at the next ECB Governing Council meeting scheduled
for June 6. That figure had been 23% ahead of today’s press conference.
The following table shows the rate cut probabilities assigned by
the EONIA curve, before and after ECB President Mario Draghi’s press
conference, for each month from June until December of this year. Each
100 basis points of probability equals a rate cut of 25 basis points.
Month Rate Prob (25bps) Prob (25bps) Pre-Draghi
—- —– ———— ———————–
June 0.322% -8.0% -15.0%
July 0.302% -16.0% -23.0%
August 0.293% -21.0% -26.0%
September 0.288% -24.0% -31.0%
October 0.287% -26.0% -33.0%
November 0.290% -25.0% -32.0%
December 0.298% -20.0% -28.0%
— London newsroom: 00 44 20 7862 7435; mchrysostomou@marketnews.com
[TOPICS: MT$$$$,M$$CR$,M$X$$$,M$$EC$]
