OUTLOOK: Price Signal Summary - Bear Threat In Oil Futures Still Present

OI data points to fresh positions being added across much of the SOFR futures strip on Tuesday, with net long setting dominating through SFRU7, before net short setting moved to the fore from SFRH8 as the strip twist steepened.

• The biggest net OI swing came in the SFRM7 contract, boosted by turnover in the SFRZ6/M7/Z7 fly, which saw ~55K lots trade on the session (dominated by selling of the structure).

• Fed Funds implied rates are unchanged on the day for the September meeting after yesterday’s CPI report (25bp cut essentially fully priced) but are up to 2.5bp lower out to 1Q26 amidst a broader FI rally.
• Cumulative cuts from 4.33% effective: 24.5bp Sep, 41bp Oct, 62bp Dec, 74bp Jan and 87bp Mar.
• The 62bp for the year compares with 56.5bp pre-CPI and 35 pre-NFP. The now outdated June SEP median had 50bp of cuts with seven members looking for no cuts at all.
• The SOFR implied yield of 3.055% (SFRH7) is 3bp lower on the day, back to fully pricing five cuts for the cycle.
• Bessent late yesterday suggested the Fed ought to be open to a 50bp rate cut next month. The Fed “could have been cutting in June, July” had it had the revised [payrolls] figures in hand at the time. He said the CPI report showcased that economists had misread the likely effect of tariffs.
• Analysts continue to shift towards market pricing for the September FOMC, with Nomura and TD Securities yesterday joining a sizeable list of those now looking for a 25bp cut next month.
• Today's scheduled Fedspeak sees Goolsbee and Bostic in focus:
  • 0800ET - Barkin (non-voter) repeats a speech on the economy. Subsequent Q&A might be watched but unlikely to say anything new - he said yesterday the "balance" between dual mandate variables is "still unclear".
  • 1300ET - Goolsbee ('25 voter, dove) speaks at a monetary policy luncheon. It's been an unusually long time since Goolsbee last spoke, on Jul 11 saying that he has seen "surprisingly little" impact from tariffs but that new tariff threats (at the time) could delay rate cuts.
  • 1330ET - Bostic (non-voter) speaks on the economic outlook (Q&A only). This should be a useful update from Bostic, who said after the July nonfarm payrolls report that he still saw only one rate cut this year. He wants to see how things evolve over the coming months and warned that it might take twelve months for businesses to adjust their prices. 

• CBK (18/12/26) vs (17/12/27) 32p, trades for the 2027 2.14 in 9.5k.

There are no OI in those strikes, new Positions.