ECB Shift Triggers Cautious Money-Market Strategies Amid Rising Interest Rates

Ofi Invest Asset Management's money-market strategies are designed to navigate evolving market conditions. Daniel Bernardo, Co-Head of Money-Market Strategies, notes that the European Central Bank (ECB) has shifted from an easing cycle in 2024 and 2025 to a more hawkish stance in 2026. The ECB raised its deposit rate by 25 bps twice in June and September, pushing it to 2.50%.

This shift in monetary policy has led Ofi Invest Asset Management to maintain a cautious approach to interest-rate risk. They aim for controlled and contained interest-rate sensitivity, no hedging on short maturities, and an opportunistic approach beyond three months when carry sufficiently compensates for policy uncertainty.

The front end of the curve continues to offer attractive risk-adjusted yields, supported by expectations that ECB rates will remain higher for longer. In contrast, the Federal Reserve in the United States has also adopted a more hawkish stance, raising its range by 25 bps to 3.75%-4% in September.

Ofi Invest Asset Management manages around €19.3 billion in money-market strategies and is positioned as one of the key players in this segment in France. Their investment strategy focuses on geographical allocations above 50% for France due to its depth, liquidity, and statistics from the Bank of France.