CZECHIA: CNB Publishes Minutes Of Financial Stability Meeting
- The Czech National Bank (CNB) released the minutes of its most recent financial stability meeting. The document revealed that "the prevailing view in the Board was that the economy was still in the part of the financial cycle in which newly accepted risks were not excessive and were not building up rapidly in banking sector balance sheets." All seven board members voted in favour of the decision to leave the countercyclical buffer (CCyB) rate unchanged at 1.25%. The decision to leave the upper limit on the LTV ratio at 80% was also unanimous. Alongside the minutes, the central bank also released the full Financial Stability Report - Autumn 2024.
- There is a strengthening consensus that the Bank Board could pause interest rate cuts next week after several members flagged it as a possibility. All six analysts polled by Bloomberg so far are calling for an on-hold decision at the CNB's meeting on December 19, with sell-side commentary also leaning in that direction. ING wrote this morning that the "December pause seems like done deal but February remains open." The CNB is currently in its media blackout period and there are no more tier-1 data releases scheduled for release before the upcoming monetary policy meeting.
- Czechia's October current account balance will cross the wires at 09:00GMT/10:00CET. Bloomberg consensus looks for a surplus of CZK5.15bn.
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STIR: SOFR/Euribor Dec ’25 Spread At Widest Level Since Early ’21
The implied rate differential between SOFR & Euribor Dec ’25 (SFRZ5 - ERZ5) contracts has widened by ~118bp since the September closing low.
- The spread now sits at the widest level seen since early ’21, at 203bp.
- The move has been driven by the U.S. short end trading off the inflationary dynamics provided by incoming President Trump’s policy preferences.
- Meanwhile, Trump’s election victory has had a dovish impact on the EUR short end, via growth expectations.
- Today’s U.S. CPI data will be key for the short-term direction of the spread, with the USD short end pricing 68bp of cuts through December ’25 vs. ~120bp at the end of October.
Fig. 1: SOFR/Euribor Dec '25 Futures Spread (SFRZ5 - ERZ5)
Source: MNI - Market News/Bloomberg
RIKSBANK: November Minutes Due at 0830GMT/0930CET
The Riksbank’s November meeting minutes are due at 0830GMT/0930CET. Focus will be on (1) to what extent last week’s unanimous 50bp cut was a close call for individual members, (2) whether there is scope for a sequential 50bp cut in December and (3) potential commentary around the US election result.
- MNI’s full review of the November decision is here.
- SEK trades a little weaker against the USD and EUR this morning, while NOKSEK is little changed.
- NOKSEK has traded in a tight 51 pip range since last Friday, hovering around the August 16 high at 0.9842. First resistance is the July 30 high at 0.9901.
BUNDS: /SWAPS: Commerzbank Extend Long End ASW Tighteners
Commerzbank note that “overnight repos are a beacon of stability and term indications are also calming down - underscoring the fundamental re-pricing of collateral risk premiums as key for ASW-moves.”
- They go on to write “although most swap spreads are trading at historic lows, as we had anticipated, we doubt that the search for the ‘fair’ clearing price of free-floating, unbounded public debt vs. ‘fiscal risk-free’ OIS curves is complete.”
- As such, they “extend (long end) ASW shorts after the 0bp target of 10-Year Bunds vs. 6-month Euribor was hit.”
