STIR: Fed Terminal Rate Set For Highest Close Since Before Payrolls
Sep-18 16:13
- Fed Funds implied rates for near-term meetings have given back about half of today’s shift higher on better-than-expected jobless claims data.
- Cumulative cuts from assumed 4.08% effective: 22bp Oct, 43.5bp Dec, 55.5bp Jan, 69bp Mar, 76bp Apr and 91.5bp June.
- SOFR futures hold a larger share of their jobless claims driven losses however, 5.5-6 ticks lower post-data through Z6-U7 contracts for 4 ticks lower on the day.
- It sees the implied terminal yield of 2.99% (SFRH7) set for its highest close since Sep 2 (a soft payrolls report on Sep 5), implying 109bp of cuts ahead.
- Yesterday’s FOMC dot plot saw rates going to 3.0-3.25% by end-2027, revised down from the median 3.4% in the June SEP as broadly expected by analysts.
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