STIR: Fed Implied Rates Maintain Mild Reaction To FOMC
Jul-27 10:24
- Fed Funds implied rates have only inched lower overnight, with slightly larger moves into 2H24 in a continuation of yesterday’s relatively mild reaction to the FOMC decision and press conference.
- They show cumulative hikes of +4.5bp for Sep (-0.5bp) and +10bp for Nov (-0.5bp) for a terminal of 5.43%, not quite pricing 50/50 odds of the second hike the median FOMC member pencilled in at the June meeting.
- Cut expectations from the Nov terminal remain in familiar territory: 5bp to Dec’23, 61bp to Jun’24 and 135bp to Dec’24.
- A heavy session ahead with the ECB decision before a US docket including 1st readings for Q2 GDP and core PCE price index, prelim readings for durable goods/wholesales inventories and jobless claims all before the BoJ overnight.
Source: Bloomberg
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STIR: Fed Rates Un-Swayed By ECB Speak, One Further Hike Priced By Nov
Jun-27 10:23
- Fed Funds implied rates are minimally changed on the day with no spillover from Lagarde headlines (won’t be able to “state with full confidence” in the near future that the peak for rates has been reached) and further ECB speak.
- Earlier, Morgan Stanley sees the Fed hiking 25bps in July with rates then still at 5.375% at end-23 before 100bp of cuts to 4.375% by end-24.
- Cumulative changes from 5.08% effective: +18bp Jul (unch), +22.5bp Sep (+0.5bp), +25.5bp to a peak effective 5.33% in Nov (+0.5bp), +17.5bp Dec (+0.5bp) and +5.5bp Jan (+0.5bp).
- No Fedspeak scheduled for today with focus still on Powell’s panel discussion in Sintra tomorrow.
BONDS: Continued widening in the spreads
Jun-27 10:20
- Continued widening in the US 10yr/Bund spread, 1bps wider, with the next upside target seen at 145.66bps, the 2023 high, now trading 142.2bps.
- For Gilt/Bund, the spread is back above the psychological 200bps level, which held last week, now trading at 201.4bps.
- Widest level since mid October and next resistance is at 206.88bps.
OUTLOOK: Price Signal Summary - Gold Remains Vulnerable
Jun-27 10:20
- On the commodity front, the bear cycle in Gold remains intact and the yellow metal traded lower last week. Trendline support has been breached - the line is drawn from the Nov 3 2022 low and the break reinforces a bearish condition. Furthermore, the move lower confirms a resumption of the downtrend. The focus is on $1903.5, 61.8% of the Feb 28 - May 4 bull cycle. Key resistance is $1985.3, the May 24 high. Initial resistance is at $1946.4, the 20-day EMA.
- In the oil space, WTI futures remain in a bear mode condition and the sharp sell-off late last week reinforces this condition. Support at $67.21, the May 31 low, has recently been pierced, a clear break would open $64.41, the May 4 low. Moving average studies are in a bear mode position highlighting a downtrend. The contract is trading below resistance at $75.70, the Jun 5 high. A break of this level would signal a reversal. Initial resistance is at $72.72, the Jun 21 high.
