STIR: Fed Rates Extend Hawkish Reaction To U.Mich, 65bp Cuts For 2025
Mar-14 15:56
- Fed Funds implied rates have continued to push higher for their most hawkish levels since Mar 3.
- There has been little to halt the reaction seen on the U.Mich consumer survey which showed another surge in inflation expectations with the 1Y at 4.9% and the 5-10Y at 3.9% for a multi-decade high.
- The survey does clearly have partisan issues but long-term expectations of independent rather than Democrat or Republican respondents also saw a marked increase to 3.7%.
- Further, it has a long history and still carries weight with FOMC members such as Governor Kugler in a speech last week as part of some “important upside risks to inflation”.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 7.5bp May, 23.5bp Jun, 32.5bp Jul and 65bp Dec.
- The 65 of cuts for 2025 compares with 71bp before Wednesday’s CPI and 76bp before Friday’s payrolls report.
- Over the week, the Sep’25 SOFR contract has seen the biggest increase in implied yields (+5bps) whilst negative growth concerns still hold with the Dec’27 holding 5bps lower.
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FOREX: EURUSD Reverses Towards Session Highs amid Tariff Comments
Feb-12 15:51
- Despite the hotter-than-expected inflation data in the US, EURUSD’s attempt lower remained contained, with spot only printing a 1.0317 low in the direct aftermath.
- Subsequently, the reversal higher for major equity indices and the single currency’s outperformance against the likes of the Yen, AUD and NZD has helped propel EURUSD back above pre-data levels, narrowing the gap to the early European highs at 1.0386.
- EURUSD resilience may have also been fuelled by most recent commentary on tariffs. First of all, the Hasset comments on reciprocal tariffs being a “work in progress”, may have boosted risk sentiment at the margin, while the latest headline from the EU trade chief on finding a tariff solution may also be supportive.
- A short-term bull theme in EURUSD remains intact for now. Attention is on the candle formation on Feb 3 - a hammer - that signals a possible reversal. 1.0427, the 50-day EMA, marks a key resistance. A clear break of it would be a bullish development.
US TSY FUTURES: March'25/June'25 Treasury Futures Roll Update
Feb-12 15:43
Details of the latest Tsy quarterly futures from March'25 to June'25 below, FVH5/FVM5 continues to lead volumes while overall percentage complete remains low, appr 2%-3% across the curve ahead the "First Notice" date on February 28. Current roll details:
- TUH5/TUM5 appr 19,400 from -5.62 to -4.62, -4.75 last
- FVH5/FVM5 appr 136,600 from -2.5 to -1.0, -1.0 last
- TYH5/TYM5 appr 33,200 from 0.25 to +1.0, +1.0 last
- UXYH5/UXYM5 appr 1,300 from 4.5 to 4.75, 4.75 last
- USH5/USM5 appr 4,200 from 5.5 to 6.75, 6.75 last
- WNH5/WNM5 less than 100 from 4.0 to 4.25, 4.0 last
- Reminder, March futures won't expire until next month: 10s, 30s and Ultras on March 20, 2s and 5s on March 31. March Tsy options expire February 21.
GILT AUCTION PREVIEW: On offer next week
Feb-12 15:33
The DMO has announced it will be looking to sell GBP4.25bln of the 4.375% Mar-28 Gilt (ISIN: GB00BSQNRC93) at its auction next Wednesday, February 19.
