📝Continue to See One Further 25Bp ECB Rate Cut In April: Nordea

The new fiscal plans do not come without risks. The issuance outlook was quite challenging already before the new plans, and now turned even more challenging. The private sector will need to buy huge amounts of bonds in the coming years, which poses upside risks for bond yields. In our baseline forecasts, we expect term premia to continue to rise, but the moves could easily end up being bigger than we have currently factored in.

We have not changed our ECB forecast despite changes in the fiscal outlook, and continue to see one further 25bp cut in April and unchanged rates from there onwards. Like discussed above, we think the recent developments balance some of the earlier downside risks to our baseline forecasts. That said, there is now a new upside risk that could potentially lead to even rate hikes during our forecast horizon late this year or 2026. - Nordea