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STIR: 80bp Of Fed Cuts Priced Through Year-End

STIR
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Dovish readthrough for Fed pricing on the back of the softer-than-expected ADP print means that Fed funds futures once again fully discount 3x 25bp cuts through year-end, with ~80bp of easing now priced through the Dec FOMC vs. ~73bp ahead of the data.

  • A reminder that as little as ~37bp of cuts were priced over the same horizon as recently as mid-February.
  • ~14.5bp of cuts priced through May vs. ~12bp ahead of the data, with ~32.5bp of cuts showing through June vs. ~28.5bp ahead of the data.
  • The miss in the headline ADP figure, coupled with mostly negative revisions to recent months, will do little to placate deepening growth concerns that have driven much of the dovish repricing seen in recent weeks.
  • Indeed, the ADP release noted that the survey “suggests a hiring hesitancy among employers as they assess the economic climate ahead”.
  • However, we have also noted the wide differences between the survey and private payrolls figures in recent months.
  • The employment component of the impending ISM services survey presents the next labour market indicator worth watching.
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Dovish readthrough for Fed pricing on the back of the softer-than-expected ADP print means that Fed funds futures once again fully discount 3x 25bp cuts through year-end, with ~80bp of easing now priced through the Dec FOMC vs. ~73bp ahead of the data.

  • A reminder that as little as ~37bp of cuts were priced over the same horizon as recently as mid-February.
  • ~14.5bp of cuts priced through May vs. ~12bp ahead of the data, with ~32.5bp of cuts showing through June vs. ~28.5bp ahead of the data.
  • The miss in the headline ADP figure, coupled with mostly negative revisions to recent months, will do little to placate deepening growth concerns that have driven much of the dovish repricing seen in recent weeks.
  • Indeed, the ADP release noted that the survey “suggests a hiring hesitancy among employers as they assess the economic climate ahead”.
  • However, we have also noted the wide differences between the survey and private payrolls figures in recent months.
  • The employment component of the impending ISM services survey presents the next labour market indicator worth watching.