On Thursday, the ECB's decision will directly affect market bets on interest rate cuts next year.
According to **, strategists and investors said this Thursday after the European Central Bank announced its last interest rate decision of the yearThe room for Eurobonds will be greater than the space.
Because long-term bond yields in Germany, Europe's largest economy, seem to have bottomed out. The yield on 10-year German bonds has been more than 40 basis points over the past month and has fallen to its lowest level since April this year, at about 22%。
Before Thursday, any signal from the ECB will make the market increase bets that the ECB will cut interest rates as early as next year, pushing up the bond rally.
Last week, the ECB's "big hawk" Isabel Schnabel suddenly released a dovish, causing the market to expect the probability of the ECB's first interest rate cut in the first quarter of next year rising to 90%.
At present, the market has reportedly fully priced in the ECB's first rate cut in 2024, with a maximum of six rate cuts of 25 basis points expected by the end of the year. There is about a 70% chance that the easing cycle will start in March next year.
But there is an opinion that ECB President Christine LagardeThere may be a surprise "** to bring German bond yields back to 24% above.
Orla Garvey, senior fixed income portfolio manager at Federated Hermes, said:
"Lagarde could easily show a more hawkish attitude towards the market. ”Gordon Shannon, portfolio manager at Twentyfour Asset Management, saidLagarde's "hawkish tone" could cause the market to erase expectations of the first rate cut in March next yearAccording to Shannon, the ECB can say that "we need to see evidence of a sustained slowdown in inflation after March" and move on to a more hawkish approach. But in reality, Shannon said, inflation would be "mathematically impossible" to be cut by then.I'll see if or how she adjusts her 'higher, longer' slogan. ”
Elliot Hentof, head of macro policy research at State Street, also said:
"The risk is a sell-off in German bunds and other European** bonds. ”For hawks such as Bundesbank President Joachim Nagel,The danger of a resurgence of inflation remains, he has previously repeatedly denied claims that interest rates have peaked.The ECB's report is unlikely to exceed market expectations. Frankly, there's a good chance it will be disappointing. ”