STIR: US Fed Rate Path Extends Climb After US-UK Trade Pact
May-08 16:44
- What was a one-way drift higher in the Fed rate path has kicked into a higher gear since the US-UK trade pact, especially for meetings after July.
- Fed Funds implied rates are now up to 10bp higher on the day for the Dec 2025 meeting (and also 9bp higher since just before the FOMC announcement yesterday) whilst SOFR implied yields are up to 14.5bp higher in 2026 contracts.
- Cumulative cuts from 4.33% effective: 5bp Jun (-1bp), 18bp Jul (-3.5bp), 36bp Sep (-6.5bp), 52bp Oct (-8.5bp) and 68.5bp Dec (-10bp).
- The 69bp of cuts for 2025 was last seen briefly on Apr 9 in the partial rolling back of reciprocal tariffs with the 90-day pause and was last sustainably lower on Mar 28.
- The SOFR implied terminal yield of 3.25% (Z6) would mark its joint highest close since Apr 23 and before that Apr 14. It’s back to 15bp below pre Apr 2 Liberation Day announcement levels.
- Tomorrow sees a bare data docket with attention instead likely on any further trade policy headlines and Fedspeak resuming after the media blackout. We’re set to hear from permanent voters Barr, Kugler and Williams as well as Goolsbee (’25 voter) and Barkin (non-voter).
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US TSYS/SUPPLY: Preview 3Y Auction
Apr-08 16:33
Tsy futures remain weaker but off midmorning lows ahead of the $58B 3Y note auction (91282CMW8) at 1300ET, WI is currently at 3.775%, 13.3bp rich to last month's auction. Auction results will be available shortly after the competitive auctions closes at 1300ET.
- March auction recap: Treasury dipped slightly post auction, the $58B 3Y deemed very solid despite a modest 0.6bp tail: high yield 3.908% vs when-Issued yield of 3.902% at auction cutoff.
- Bid-to-cover ratio likewise dipped slightly to 2.70x from February's post-2023 high 2.79x, but this was still the 2nd highest cover since 2023.
- The tail was in-line with recent auctions (0.3bp average in previous 5 sales including January's strong 1.2bp trade-through), and came despite a lack of significant concession going into the auction.
- Peripheral stats: indirect take-up 62.5% vs. 64.18% prior; direct bidder take-up 26.0%; primary dealer take-up 11.5%.
OPTIONS: Larger FX Option Pipeline
Apr-08 16:19
- EUR/USD: Apr10 $1.0900-10(E2.6bln), $1.0935-50(E2.4bln); Apr11 $1.0950-60(E1.1bln), $1.1000(E1.3bln)
- USD/JPY: Apr09 Y147.40-50($1.1bln); Apr10 Y143.00($1.3bln)
- EUR/GBP: Apr09 Gbp0.8405-20(E1.1bln)
- AUD/USD: Apr10 $0.6400(A$1.3bln)
- USD/CAD: Apr10 C$1.4395-00($1.5bln); Apr11 C$1.4045($1.6bln)
- USD/CNY: Apr10 Cny7.4000($1.4bln)
LOOK AHEAD: Wednesday Data Calendar: March FOMC Minutes, Fed Speak
Apr-08 16:17
- US Data/Speaker Calendar (prior, estimate)
- 09-Apr 0700 MBA Mortgage Applications (-1.6%, --)
- 09-Apr 1000 Wholesale Inventories MoM (0.3%, 0.4%)
- 09-Apr 1000 Wholesale Trade Sales MoM (-1.3%, 0.8%)
- 09-Apr 1100 Richmond Fed Barkin at Economic Club Washington
- 09-Apr 1130 US Tsy $60B 17W bill auction
- 09-Apr 1300 US Tsy $39B 10Y note re-open (91282CMM0)
- 09-Apr 1400 FOMC Meeting Minutes for March meeting
