STIR: Losses From Trump Fed Chair Pick Probably In Early 2026 Pared
- Fed Funds implied rates are 0.5-1.5bp lower on the day for meetings out to mid-2026, sitting near the day’s more dovish range.
- Cumulative cuts from 3.89% effective: 23.5bp Dec, 31bp Jan, 38bp Mar, 44.5bp Apr, 59bp Jun.
- Note that the effective rate has climbed recently and whilst it was most recently unchanged, the 75th percentile pushed above 1bp higher to 3.90%.
- Further out, SOFR futures have recovered about half of their intraday losses seen with Trump saying he will probably announce the next Fed chair early next year. It would be a delay of the pre-Christmas timeline previously touted by Bessent and Trump more recently said he had chosen his pick.
- It has seen Hassett’s odds drop to 65% from ~80% early today on Polymarket, but that’s still above 35-40% seen before last week’s Bloomberg sources piece seeing him as the frontrunner.
- SOFR futures are up +0.02 on the day, led by the M6, whilst the terminal implied yield of 3.065% (H7) is unchanged since the start of the US session. It holds yesterday’s push higher in the implied yield to lift off a particularly steady period around 3% seen since Williams’s dovish guidance on Nov 21.
- Tomorrow sees greater data focus again, with the monthly ADP employment report for November (with of course the November NFP report not coming until Dec 16 for after next week’s FOMC decision) and ISM services.
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
