STIR: Next Fed Cut Seen In October Ahead Of CPI
Jun-11 10:14
- Fed Funds implied rates for 2025 meetings are close to late May’s most hawkish levels since February, with a next cut fully priced for Oct and less than two cuts fully priced to year-end.
- There has been little net impact on near-term meetings from the US appeals court late yesterday ruling that tariffs can stay in place longer or the more recent China statement following two days of US-China talks in London.
- That’s ahead of today’s CPI report for May. An upside surprise could tee up a hawkish Fed next week, emboldening more members to pencil in at most one cut in 2025.
- MNI US CPI Preview: https://media.marketnews.com/USCPI_Prev_Jun2025_a86717a017.pdf
- Cumulative cuts from 4.33% effective: 0bp Jun, 3.5bp Jul, 16.5bp Sep, 28bp Oct and 43.5bp Dec.
- The SOFR implied terminal yield of 3.41% (SFRZ6, +2bp) is still a little off Friday’s post-payrolls close of 3.435% at what was its highest since May 14.
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FOREX: Easing Trade Tensions Weigh on Franc, USDCHF Back Above Key Level
May-12 10:10
- In similar vein to the Yen moves, the Swiss Franc is seeing pronounced losses today following the moderation in China-U.S. trade tensions. USDCHF rallied as much as 1.85% with topside momentum underpinned by a break back above the key 0.8333 level, the 2023 low and prior breakdown point.
- The move substantially narrowed the gap to an important resistance for USDCHF, which stands at 0.8485, the 50-day EMA. A break of this average would signal scope for a recovery towards 0.8578, the April 10 high, while the ‘liberation day’ breakdown level remains much further out at 0.8758.
- While not the primary driver of the CHF turnaround, it is worth highlighting the most recent comments from SNB President Schlegel on Franc strength will be providing an additional impulse to the cross/CHF recovery. As such, EURCHF finds itself towards the top end of its 0.9300/0.9400 range seen across May so far.
- While US Treasury Secretary Bessent confirmed today that Switzerland (alongside the UK) has moved to the "front of the queue" for a trade deal with the US following similar rhetoric from the Swiss government Friday, President Trump has announced a major executive order limiting US healthcare spending to be signed during US morning hours; policies hitting the Swiss pharmaceutical sector could further weigh on the CHF throughout Monday’s session.
EU-BOND SYNDICATION: New 20-year Oct-45 mandate
May-12 10:04
- "The EU has mandated Barclays, Credit Agricole CIB, LBBW, Morgan Stanley and Nordea as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer new 20-year benchmark due 12th October 2045. No further group."
- "The transaction will be launched tomorrow, subject to market conditions. Joint Lead Managers will be paid a fee in connection to the transaction.”
- This is in line with MNI's expectations and we pencil in a wide E5-9bln range for the transaction size.
US TSY FUTURES: CFTC Shows Asset Managers Adding To Longs, Funds Increase Shorts
May-12 10:03
The latest CFTC CoT report pointed to continued extension of exposure for both asset managers and leveraged funds through May 6.
- The former extended their net long position by ~$11mln in DV01 equivalent terms, as they added to longs in FV through US futures, while they trimmed lightened long exposure in TU & WN contracts.
- Meanwhile, leveraged funds added ~$20.4mln DV01 equivalent across the curve, only trimming short exposure in TU futures. Note that they added ~$13mln DV01 equivalent of fresh net shorts in TY futures alone.
- Broader non-commercial net positioning remains net short across the curve.
Source: MNI - Market News/CFTC/Blooomberg
