GBP 5y5y Forward Swap Continues to Trade Rich vs EUR Equivalent
Source: BFW (Bloomberg First Word)
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(Bloomberg) -- GBP swap forwards continue to trade rich vs EUR equivalents, Bloomberg strategist Tanvir Sandhu writes.
Alert: HALISTER1- GBP 5y5y forward swap rate vs EUR spread at 23bp, near narrowest level since Nov. 2012
- See 1-year regression analysis here; R^2 at 0.65, y=0.289x+0.114, highlighting the RV dislocation
- GBP OIS forwards currently pricing 51% probability of a 15bp BOE rate cut to 0.10% by Dec. vs 68% 5-days earlier, assuming 3.5bps Sonia-base rate corridor
- Eonia currently pricing 37% odds of a 10bps ECB deposit rate cut in Dec. vs 49% 5-days earlier, assuming 6bps Eonia-depo rate corridor
- NOTE: GBP rates volatility may extend decline toward EUR equivalents, see more here from Aug. 5
- NOTE: GBP rates skew signals implicit floor as distribution of expected rates narrows, see more here from Aug. 2
- NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.
Source: BFW (Bloomberg First Word)
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UUID: 7947283