STIR: Fed Rate Path Within Narrow Weekly Range

• As noted on the Bund Open, US Yields level remain a deep concern for investors, higher US rates impact the cost of service its debt, the Tax plan is expected to raise Debt and its Deficit.
• Pointed to the US Emini on the European Open and potential for some fade back down to 5867.25 and the 5789.06 area.
• Higher Yield combined with the Risk Off was the cause for the Tariffs delay back in April.

• Fed Funds implied rates are up to 1.5bp higher on the day for 2025 meetings, with 34bp of cuts priced for the October FOMC for close to recent hawkish extremes.
• The lift is helped by higher oil futures (WTI +1.4%) on a report that Israel is preparing to strike Iran and some spillover from stronger than expected UK CPI inflation.
• Cumulative cuts from 4.33% effective: 1.5bp Jun, 7bp Jul, 20bp Sep, 34bp Oct and 51bp Dec.
• The implied rate
• SOFR implied yields are 3bps higher in late 2026 contracts, with the terminal yield of 3.365% (SFRZ6) keeping within recent ranges.
• Today sees a thinner session for Fedspeak, with just Barkin (non-voter) and Bowman (voter) in a Fed Listens event. Bowman won’t offer any remarks.
• Barkin didn’t touch on monetary policy in a speech yesterday. He noted on May 9 that consumer spending and business investment is still very solid although it’s not a given that firms can raise prices on tariffs.
• Yesterday saw Daly, Hammack and Bostic say that a proposal for the FOMC to publish economic scenarios and reaction functions in a quarterly report may be confusing and difficult to accomplish practically. Even if the FOMC published scenarios, the public "may not be able to process it, they may not be able to understand," Hammack said, adding, "But I'm open to ideas about how to be more transparent in our process."

OI data points to net long cover dominating in the SOFR whites on Tuesday, before a mix of net long setting and short cover came to the fore further out, with twist flattening seen on the strip.