European rates market update post ECB

Research evidence excerpt

European rates market update post ECB

Francis Diamond AC (44-20) 7134-1504 Khagendra Gupta AC (44-20) 7134-0486 Global Markets Strategy J P M O R G A N

francis.diamond@jpmorgan.com khagendra.x.gupta@jpmorgan.com European rates market update post

J.P. Morgan Securities plc ECB

Aditya Chordia AC (44-20) 7134-2132 Elisabetta Ferrara (44-20) 7134-2765 23 July 2026

aditya.x.chordia@jpmorgan.com elisabetta.ferrara@jpmorgan.com

The ECB kept the depo rate on hold at 2.25% as expected with a unanimous vote and

there was nothing in the press-conference that was particularly surprising with Euro rate

markets little changed pricing post the ECB meeting. Lagarde stated that the current

energy backdrop is consistent with the ‘baseline’ energy scenario presented in June and

that the ECB remains very data-dependent. Her comment that the ECB decided to keep

rates on hold “at the moment” and also that some governors “ ...asked themselves

whether we should not consider a hike” firmly keeps alive the prospect of a 25bp hike in

September.

€STR money market yields had risen sharply going into the ECB meeting, primarily

driven by rising oil/gas prices as the Middle-East conflict re-escalated with TTF gas

prices now at higher levels than seen during March/April. In true fashion to past ECB

meetings, the delivery did not elicit any volatility with yields remaining broadly

unchanged during the press-conference. The €STR curve is now pricing a cumulative

23bp/48bp/70bp of hikes by Sep26/Dec26/Jun27, respectively (Figure 1The€STRcurveisnowpricingacumulative23bpand48bpofcumulativehikesbySeptemberandDecember2026,respectively).

Figure 1: The €STR curve is now pricing a cumulative 23bp and 48bp of Figure 2: The sensitivity of €STR yields to gas prices has increased