• Meanwhile in markets, Brent crude prices are fluctuating around $105 a barrel this session as conflicting headlines on escalation and de-escalation keep markets on edge;
• Bund and US Treasury yields are down 0–3bps today in a bull-steepening move, though this barely offsets surge in yields seen over the past two weeks. Peripheral-Bund spreads remain near recent highs, with Italian and Portuguese spreads now trading convincingly above their 200-DMAs. While both the FOMC and ECB will hold rates steady this week, year-end pricing has shifted significantly: fed funds futures now price slightly less than one cut for the FOMC and ESTR forwards just over 40bps of hikes for the ECB;
• Shifting to broader market commentary, the Stoxx 50 is down nearly three-quarters of a percent today, while S&P 500 futures post marginal gains over Friday’s close. Gold remains weighed down by rising real yields in the US, currently trading below the $5,000 handle. In energy, European natural gas (Dutch TTF) is trading at €51 a MWh, an increase of over 60 percent since the start of the conflict two weeks ago. The broad US dollar is slightly lower today, with EURUSD trading at 1.145;
• In our neck of the woods, EURCHF opened below 0.900 before clawing back to 0.903 at pixel time. There is no evidence yet that the Swiss National Bank has intervened in FX markets to curb the franc’s strength – so far, they have only jawboned the franc lower by touting their increased willingness to intervene. Fortunately for the Swiss, a strength of the greenback alleviates some of the deflationary pressure from the franc. USDCHF briefly cleared 0.79 this morning, marking a two and a half percent gain over the past month;
• The SNB is among a crowded calendar of rate decisions this week. On Thursday, the bank will hold steady despite the franc’s near record strength. Rising energy costs are currently acting as a sufficient counterweight to offset the strength. SARON forwards have shifted from pricing in cuts to leaning towards hikes, with 22bps priced in by year-end. Nevertheless, we still believe that rate hikes remain off the table in 2026;
• Looking ahead, the calendar is empty for the rest of the day. Tomorrow is also set to be a quiet one, with the week’s central bank rate decision bonanza only kicking off Wednesday with the Bank of Canada and the FOMC decisions.