Market Information Tuesday 26 May 2026

European Central Bank (ECB) board member Isabel Schnabel has called for a rate hike in June, arguing that persistently high energy prices are spilling over into the broader economy. Eurozone inflation reached 3% last month, well above the ECB’s 2% target. Schnabel stated that even a peace deal with Iran would not remove the need for action, as energy infrastructure damage and supply chain disruptions are already entrenched. Markets have fully priced in two hikes, while economists expect two hikes followed by a cut in mid-2027. Economic growth remains fragile, with the European Commission forecasting just 0.9% expansion in 2026.

Negotiations between the United States and Iran over a ceasefire extension remain stalled, primarily over Iran’s nuclear programme and access to frozen Iranian assets abroad. A 60-day truce extension is under discussion, during which Iran would gradually reopen the Strait of Hormuz in exchange for the US lifting its naval blockade. Despite earlier optimism from President Trump, key issues remain unresolved. Markets responded positively to hopes of a deal, while oil prices fell in anticipation of the strait reopening.

US bond markets are signalling that interest rates may not be high enough. The 2-year Treasury yield rose above 4.1%, well above the Federal Reserve’s target range of 3.50% to 3.75%, while the 10-year yield approached 4.7%. Wholesale prices surged 6% in April, driven by energy costs linked to the Iran war. Markets now price in a 57% chance of at least one rate hike by December. New Fed Chair Kevin Warsh faces a challenging inflation environment as he takes office.

The 6M Euribor decreased with 5 basis points to 2.55% compared to previous business day. The 10Y Swap decreased with 9 basis points to 2.99% compared to previous business day.

In the attachment, today’s market data on money and capital market rates as well as other rates are presented.