STIR: Payrolls Looms Large Plus First Post-FOMC Fedspeak Including Dissents
- Fed Funds implied rates are only 0.5bp lower overnight for near-term FOMC meetings, holding the week’s shift higher driven by Fed Chair Powell’s patient rhetoric in Wednesday’s press conference.
- Cumulative cuts from 4.33% effective: 11bp Sep (vs 15.5bp pre FOMC), 19.5bp Oct, 34bp Dec (vs 44bp), 42bp Jan and 53.5bp Mar (vs 65bp).
- The SOFR curve has steepened modestly overnight but doesn’t materially change the post-FOMC flattening.
- The SOFR implied terminal yield of 3.245% (SFRH7, +1.5bp on the day) last closed higher on Jul 15 but remains within the 3.1-3.3% range seen through July.
- Front rate moves are contained ahead of the July nonfarm payrolls report at 0830ET which is also followed by ISM manufacturing for July at 1000ET. We see greater sensitivity to a dovish NFP report – see the MNI Payrolls Preview: https://media.marketnews.com/USNFP_Aug2025_Preview_3bfda52c8f.pdf
- Cleveland Fed's Hammack (’26 voter, hawk) is the first scheduled post-FOMC speaker at 0910ET on Bloomberg TV before Atlanta Fed’s Bostic (non-voter) on CNBC at 1030ET.
- We also expect dissent statements from Bowman and Waller. There is no set time here although for reference Waller's March statement came at 1000ET and Bowman's September statement at 1300ET. However, Waller’s in particular shouldn’t be a surprise, his speech on July 17 (The Case For Cutting Now) explicitly laid his arguments out, and Bowman’s dissent was also widely expected since her speech on Jun 23 (Unintended Policy Shifts and Unexpected Consequences).
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STIR: US Rates Consolidate JOLTS-Driven Shift Off Dovish Lows
- Fed Funds implied rates are up to 1bp higher on the day for 2025 meetings, at the top end of yesterday’s range after a strong JOLTS report helped extend a rates sell-off.
- President Trump has threatened Japan with tariffs of up to 35%, doubting whether the US will make a deal with Japan before the July 8 deadline.
- Cumulative cuts from 4.33% effective: 5bp Jul, 28bp Sep, 44.5bp Oct, 63.5bp Dec, 74bp Jan and 87bp Mar.
- The SOFR implied terminal yield of 3.115% (SFRZ6) is 1.5bp higher after yesterday’s 7bp lift off levels that had started to near lows since before the Presidential election in November.
- That’s a little under fully pricing 125bp of cuts from here by end-2026 compared to the 100bp of cuts envisaged by the median FOMC dot for end-2027 (including 75bp of cuts by end-2026).
- There’s no Fedspeak scheduled today, whilst data is mostly labor market focused with Challenger Job cuts (1230ET) and ADP employment (1315ET) for June.
SOFR: Mix Of Short Setting & Long Cover Seen In SOFR Futures On Tuesday
OI data points to a mix of net short setting and long cover through the SOFR blues on Tuesday, with JOLTS data and another firm reading for the prices paid component within the ISM manufacturing survey driving a hawkish repricing in the short end.
- The most meaningful adjustments came via net short setting in 3 of the 4 white contracts.
| 01-Jul-25 | 30-Jun-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRM5 | 1,323,659 | 1,299,447 | +24,212 | Whites | +50,316 |
SFRU5 | 1,137,980 | 1,123,994 | +13,986 | Reds | -10,377 |
SFRZ5 | 1,266,096 | 1,273,285 | -7,189 | Greens | +7,569 |
SFRH6 | 982,151 | 962,844 | +19,307 | Blues | -6,023 |
SFRM6 | 870,329 | 861,826 | +8,503 |
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SFRU6 | 829,539 | 832,446 | -2,907 |
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SFRZ6 | 940,377 | 956,058 | -15,681 |
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SFRH7 | 706,290 | 706,582 | -292 |
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SFRM7 | 649,700 | 647,534 | +2,166 |
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SFRU7 | 455,723 | 454,869 | +854 |
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SFRZ7 | 409,837 | 410,377 | -540 |
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SFRH8 | 310,797 | 305,708 | +5,089 |
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SFRM8 | 230,270 | 233,200 | -2,930 |
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SFRU8 | 204,922 | 205,032 | -110 |
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SFRZ8 | 185,378 | 188,924 | -3,546 |
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SFRH9 | 138,709 | 138,146 | +563 |
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US 10YR FUTURE TECHS: (U5) Bull Cycle Remains In Play
- RES 4: 114-14 High Apr 7 and key resistance
- RES 3: 113-07 76.4% retracement of the Apr 7 - 11 bear leg
- RES 2: 112-23 High May 1 and key resistance
- RES 1: 112-12+/15 High Jul 1 / 61.8% of the Apr 7 - 11 sell-off
- PRICE: 111-22+ @ 11:11 BST Jul 2
- SUP 1: 111-20+ Intraday low
- SUP 2: 111-07+ 20-day EMA
- SUP 3: 110-30 50-day EMA
- SUP 4: 110-16 Low Jun 20
A bull cycle in Treasury futures remains intact, however, price reversed hard off highs into Tuesday’s close. Attention is on the next important resistance at 112-15, the 61.8% retracement of the Apr 7 - 11 steep sell-off. Clearance of this hurdle would strengthen a bull theme and expose 112-23, the May 1 high. Note that the uptrend is overbought, a pullback would unwind this position. First key support to watch is 111.07+, the 20-day EMA.
