STIR: Week Sees Modest Shift Higher In Implied Fed Rates
Jul-11 20:11
The futures-implied Fed funds rate path shifted a little toward the tighter side this week.
- Since the Jul 3 close (skipping last Friday's thin July 4 session), expectations for total 2025 cuts have fluctuated between 49bp and 54bp, ending up the week at about 50bp (with the implied rate of 3.83% representing a rise of a little over 1bp).
- Implied rates drifted modestly higher to start the week in an apparent spill-over from last week's solid employment report. They fell on Wednesday in part due to President Trump's renewed criticism of Fed Chair Powell's reluctance to cut rates.
- The first cut remains only fully priced by October's FOMC meeting, with a July easing remaining only a remote possibility (under 8%).
- There's about 94bp of cuts priced through the next 12 months in total, with a notable jump between April and June (13bp) appearing to reflect expectations that Fed Chair Powell will be replaced at the end of his term in May with a more dovish White House appointee.
| Meeting | Current FF Implieds (%), LH | Cumulative Change From Current Rate (bp) | Incremental Chg (bp) | Last Week's Close (Jul 03) | Chg Since Then (bp) |
| Jul 30 2025 | 4.31 | -1.7 | -1.7 | 4.32 | -0.5 |
| Sep 17 2025 | 4.15 | -17.6 | -15.9 | 4.15 | 0.7 |
| Oct 29 2025 | 4.01 | -32.2 | -14.6 | 4.00 | 1.3 |
| Dec 10 2025 | 3.83 | -50.1 | -17.9 | 3.82 | 1.3 |
| Jan 28 2026 | 3.73 | -60.3 | -10.2 | 3.71 | 1.4 |
| Mar 18 2026 | 3.60 | -73.4 | -13.1 | 3.57 | 2.6 |
| Apr 29 2026 | 3.52 | -80.7 | -7.3 | 3.49 | 3.0 |
| Jun 17 2026 | 3.40 | -93.5 | -12.8 | 3.36 | 3.6 |
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USDCAD TECHS: Southbound
Jun-11 20:00
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4111 High Apr 4
- RES 2: 1.3892/1.4016 50-day EMA / High May 12 and 13
- RES 1: 1.3772 20-day EMA
- PRICE: 1.3669 @ 16:36 BST Jun 11
- SUP 1: 1.3611 Low Oct 8 2024
- SUP 2: 1.3579 1.500 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
The trend structure in USDCAD remains bearish and short-term gains are considered corrective. Support at 1.3686, the May 26 low and a bear trigger, has recently been cleared, confirming a resumption of the downtrend. This maintains the price sequence of lower lows and lower highs. Sights are on 1.3579 next, a Fibonacci projection. Resistance at the 50-day EMA is at 1.3892 - a key level. The 20-day EMA is at 1.3772.
US TSYS: Extending Late Session Highs: ME Risk Adds to Soft CPI Support
Jun-11 19:46
- Treasuries look to finish near late Wednesday session highs as tensions in the Middle East underscored risk-off support for rates after this morning's soft CPI set the stage for an early rate rally (overlooking this morning's "done deal" US/China rare earth trade negotiation headlines).
- The US embassy in Baghdad is readying for an evacuation amid rising regional security tensions, likely linked to concerns over failed nuclear talks with Iran, Reuters reported. Iran threatens to target US. bases if nuclear talks fail, heightening fears of military conflict, Reuters said.
- Headline inflation came in below-expected at 0.08% M/M (0.20% MNI median) - but this was due entirely to the downside miss in core items: core services excl OER & primary rents ('supercore'): 0.061% M/M after 0.209%. Latest 3mth av of 0.01%; core services excl all shelter: 0.056% M/M after 0.151%. Latest 3mth av of 0.046%.
- Rates extended after decent $39B 10Y note auction re-open stopped .9bp through: drawing 4.421% high yield vs. 4.430% WI; 2.52x bid-to-cover vs. 2.60x prior.
- Focus turns to Thursday's PPI inflation and weekly claims.
US FISCAL: Tsy Sec Bessent: Eyeing <4% Deficit, Staying In Office Until 2029
Jun-11 19:35
A few notes from Treasury Secretary Bessent's 5+ hour hearing at the House Ways and Means Committee Wednesday:
- Bessent suggested that the US could extend the pause on reciprocal tariffs beyond the July 9 deadline to reach an agreement - "It is highly likely that those countries or trading blocs in the case of the E.U., who are negotiating in good faith, we will roll the date forward to continue good faith negotiations".
- Bessent said the current fiscal year deficit would be between 6.5-6.7% of GDP (which as MNI noted earlier is where the deficit is tracking through the first 8 months of the fiscal year to May).
- Regarding his previously stated goal of achieving a 3% of GDP deficit, he told the committee that he wanted to get it under 4% by the end of Trump's term. "I said that we would like to have a three in front of the deficit to GDP by 2028 the end of President Trump's term, which is the long term average."
- He wouldn't be drawn on an x-date estimate in response to a question, saying that estimate sare "imprecise", identifying mid-to-late summer as the most likely timing. He told Congress on May 9 that there was a "reasonable probability" that the x-date could be reached in August.
- Outside of the usual political wrangling on the deficit impact of the fiscal legislation going through Congress, there was little on actual Treasury issuance. When asked about potential novel approaches to Treasury instrument issuance, including bonds with an "equity interest" in cash receipts, Bessent said he was open to ideas but "right now, we are committed to the fulsome the regular cadence of treasury issuance as it is."
- Bessent indicated that he'd like to remain Treasury Secretary until 2029 - of note given reports and market speculation that he could be named Powell's successor as Fed Chair in the near future.
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