ADP Adds Further Weight To Fed Pricing

Softer than expected headline ADP employment data helps FOMC-dated OIS to levels seen at the end of last week, although pricing was already biased that way after the move off session cheaps in Tsys. The previously covered move lower in oil may have also helped the pre-data downtick.

• Sep ’24 FOMC-dated OIS is ~8.5bp softer on the day, but most of the move had taken place pre-data.
• ~5.5bp of tightening is now showing for the Nov ’23 meeting, while markets now price less than even odds of one further rate hike in the cycle, with terminal policy rate pricing ~10bp above prevailing rate levels.
• Beyond there, ~52bp of cuts are priced through Sep ’24 vs. current terminal rate pricing levels.
• Note that a 25bp cut from prevailing rate levels is now more than fully priced come the end of July ’24 FOMC.