STIR: ECB Pricing Little Changed On The Day
Jul-17 10:28
ECB-dated OIS is little changed to start the week, with the liquid contracts generally operating within 1bp of Friday’s closing levels at typing. Recent price action in wider core global FI markets has kept any pay-side flow in check.
- ECB speak has seen Governing Council member Vasle warn against the high and resilient nature of core inflation.
- Elsewhere, the Bundesbank flagged a risk of slower than expected German GDP growth vs. previous expectations, while also outlining expectations for core inflation to remain very high over the summer, even with a moderation in general inflation potentially in play over the coming months.
- All in all, ECB-dated OIS prices a 25bp hike at next week’s meeting with virtual certainty, while a little over 42bp of cumulative tightening is showing through September. Beyond there, a terminal deposit rate just above 4.00% is priced, with those measures all operating in familiar territory.
- The latest BBG survey of economists indicated a central expectation for a terminal deposit rate of 4.00% to be reached in September.
- This afternoon will see Executive Board member Elderson & Governing Council Member Vujcic appear on a panel.
| ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
| Jul-23 | 3.645 | +24.3 |
| Sep-23 | 3.823 | +42.1 |
| Oct-23 | 3.893 | +49.1 |
| Dec-23 | 3.926 | +52.4 |
| Jan-24 | 3.916 | +51.4 |
| Mar-24 | 3.888 | +48.6 |
| Apr-24 | 3.818 | +41.6 |
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US: Trump's Implied Probability Of Winning GOP Primary Same As Before Indictment
Jun-16 19:19
Former President Donald Trump remains the clear frontrunner to win the 2024 Republican Presidential primary after recovering from a moderate dip following his federal indictment last week, according to data from Smarkets.
- Smarkets shows Trump's implied probability of winning of a touch under 65%, almost identical to the 66.7% he enjoyed immediately before he was indicted by the Department of Justice.
- CBS: "...six in 10 Republican primary voters say he would "definitely" beat Mr. Biden in a 2024 general-election rematch. And comparing data collected before and after federal charges were unsealed, the new indictment has not put a dent into this number — at least not yet."
- Elaine Kamarack at the non-partisan Brookings Institution warns against reading too much into Trump's lead during the 'invisible primary' period of the campaign.
- According to Kamarack, the principle threat to Trump is failing to secure the nomination early or having the primary field thinned to a one-on-one contest: "For Trump to win, he has to win early, and the field of candidates has to be large and stay large after Super Tuesday 2024."
Figure 1: 2024 Republican Presidential Primary Winner
Source: Smarkets
US TSYS: Weaker Rates Discount Rising UofM Sentiment, Lower 1Y Inflation Exp
Jun-16 19:15
- Treasury futures remain weaker, but off morning lows after futures inexplicably reversed a post UofM sentiment data rally, front month 10Y futures slipped to 112-24.5 low, trades above technical support (112-12+, Low Jun 14) at 113-00, yield 3.7730% +.0565.
- No particular headline driver for the reversal as it appeared FI longs took the post UofM rally (sentiment 63.9 vs. 60.0 est, 59.2 prior while 1Y inflation exp falls to 3.3% vs. 4.1% est) as an opportunity to scale back risk ahead the long holiday weekend.
- The 2s10s curve tapped -98.341 low, lowest since March 8 43 year inverted low of appr -110.0, this as short end rates price in projected 25bp hike in one of the next 3 FOMC meets.
- Chances of a 25bp hike next at the July 26 FOMC is approximately 70% with Fed funds implied at 17.6bp. Probability of a 25bp hike over the two meetings that follow remain above 80%: September cumulative at +21.3bp to 5.293%, November cumulative 20.3bp to 5.282%. while December cumulative holds at 11.8bp to 5.197%. At the moment, Fed terminal at 5.290% in Oct'23.
- Mixed policy opinions with the Fed out of blackout: Slowing the pace of interest rate increases gives the Fed more time to assess data, and the Fed can "do more" if slowing demand isn't translating into lower inflation, Richmond Fed Barkin said Friday.
- Conversely, the Federal Reserve must raise interest rates a lot more in order to bring inflation back to target and this week's pause was misguided given stubborn prices, former Richmond Fed President Jeffrey Lacker told MNI earlier.
US: Republican Support Trump's Classified Govt Document Actions Decreases
Jun-16 18:44
A new survey from the Economist/YouGov suggests that Republicans are less likely to approve of former President Donald Trump taking classified government documents than they were last August.
- YouGov: “about one-quarter of Americans (24%) strongly or somewhat approve of Trump taking presidential records with him from the White House to his private residence after leaving office…”
- “Compared to last August, approval of Trump’s actions has fallen 8 percentage points. The most notable drop in approval (14 points) was among Republicans: Currently, 39% approve of Trump taking the records, while last August, 53% did.”
- The survey suggests that while Trump remains the clear frontrunner for the Republican presidential nomination, Republican support for his actions may be softer than the prevailing wisdom suggests.
Figure 1: Approval of Former President Donald Trump’s Storage of Govt Materials
Source: Economist/YouGov
