At Any Rate Global Rates: ECB preview and long end curve thoughts
May 30, 2025
Khagendra Gupta, an insightful European Rates Strategist at JPMorgan, joins to discuss crucial shifts in the Euro area rate markets as the ECB meeting approaches. They dive into the anticipated 25 basis point cut and its impact on monetary policy amid slowing growth concerns. Gupta also sheds light on the Dutch pension fund transition and its effect on the long-term interest rates and yield curves. Finally, they explore emerging UK pension regulations and how they may influence investment strategies and economic growth.
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Underpriced ECB July Rate Cut
- Market expects a 25 basis point ECB rate cut in June with about 50 basis points total easing by year-end.
- However, pricing for the pace of easing is too slow; July cut likelihood is underpriced.
Downside Risks for Terminal Rates
- Terminal rate pricing is fair near 1.75% after two ECB cuts but downside risks exist.
- Global tariff uncertainties and weak growth could pressure rates lower, so ECB is expected to stay data-dependent.
Dutch Pensions Steepen Curve
- Dutch pension funds' shift from defined benefit to defined contribution will reduce long-end swap hedging.
- This transition supports a steeper 10-30 year curve and influences euro market positioning.