STIR: Effective Fed Funds Rate

Fed Gov Waller (permanent voter, dove) sticks to his dovish stance in a CNBC interview, calling for rate cuts to resume imminently in a move toward neutral over the coming months- though he remains uncertain about how quickly the Fed will remove restrictiveness (and has nothing new to add re his Fed Chair candidacy). 

• Indeed, Waller restates his case for a cut at the September Fed meeting on the basis of labor market risks, saying "for me, I think we need to start cutting rates at the next meeting, and then we don't have to go in a locked sequence of steps. We can kind of see where things are going, because people are still worried about tariff inflation. I'm not, but everybody else is. So I would say over the next three to six months, we can see multiple cuts coming in, whether it's like every other meeting, every meeting, we'll have to wait and see what the data says and where we are headed."
• He elaborates: "What we want to do is start cutting because [of] the labor market, but we can always adjust the pace depending on how the data comes in. So I kind of use this analogy that, you know, when I was in college, you know, northern Minnesota, I drive home for Christmas. I knew what the ultimate destination was, but how fast I got home depended on the weather, which is the incoming data, and that's kind of where we're at now. We kind of know we want to get towards neutral. We know roughly how much you might want to cut, say, 100, 150 basis points, but how fast we get there is going to depend on the data that comes in."
• He also notes that this outlook depends on one's view of neutral and he suggests that some of his FOMC colleagues'  estimates are "much higher" than his: "If your rates are above what you think is neutral, which for at least half of the committee, is 3% then policy is still moderately restrictive. So my other colleagues have much higher neutral rates, so they think we're barely restrictive."
• Asked on CNBC about his take on current bond market dynamics with long-end yields rising, says that "if there's anything that was worrisome that was driving the 30 (year Treasury yield), you'd think it would also start affecting the 10, but, but it's not. It's kind of anchored there. And... on the short end, the markets are certainly pricing in cuts from the Fed in the next few months, which is probably a reasonable estimate."
• Gov Waller says he hasn't interviewed for the Fed Chair job with Treasury Sec Bessent, and don't have an interview scheduled "at this moment". Asked whether he still considers Lisa Cook to be a Federal Reserve Governor: "Let's see. This is in the courts. This is no longer an issue for me. The courts will be deciding soon how this is going to play out. So I really just don't have any comment."

• MNI: US REDBOOK: AUG STORE SALES +6.1% V YR AGO MO
• US REDBOOK: STORE SALES +6.5% WK ENDED AUG 30 V YR AGO WK

Long 10-year:

• Spread set at MS + 95bp (Guidance was MS+105bp area and revised to MS + 95-100bp (WPIR))
• Size: E1.0bln (in line with MNI estimate)
• Books closed in excess of E1.9bln (ex JLM interest)
• Maturity: 10 March 2036
• Coupon: Short first
• ISIN: XS3175946071

20-year:

• Spread set earlier at MS +140bp (guidance was MS+145bp area)
• Size: E750mln (MNI pencilled in E1bln)
• Books closed in excess of E1.6bln (ex JLM interest)
• Maturity: 10 September 2045
• ISIN: XS3175947046

For both:

• Bookrunners: Erste Group (B&D), HSBC and Societe Generale
• Settlement Date: 10 September 2025 (T+5)
• Timing: Allocations and pricing to follow

From market source / MNI colour