Asia To Digest Expected 50bp Fed Hike & Powell Rhetoric

TYH3 deals at 114-29, in line with levels seen in late NY dealing.

• Cash Tsys finished flat to 4bp richer on Wednesday, with the belly outperforming.
• The Federal Reserve raised the funds rate by the expected 50bp
• The dot plot emphasized the need for a higher than previously foreseen terminal rate (as had been signaled beforehand), with officials now looking for a peak rate of 5.10% in 2023, 50bp higher than the September estimate.
• After consolidating Wednesdays post-CPI gains in pre-FOMC trading, Tsys fell in the aftermath of the rate announcement, before paring losses during Fed Chair Powell's press conference to end the day marginally higher.
• Powell reiterated that the Fed still has some way to go to rein in inflation, however, he then noted that the funds rate was getting close to a sufficiently restrictive rate level. He also said that the size of the rate increase delivered at the next meeting would depend on incoming data, raising the possibility of a further step down in the pace of tightening.
• OIS markets are pricing in 32bp of tightening for the Fed's Feb '23 meeting, with a terminal rate of 4.87% in May '23, ~23bp below the Feds dot plots median rate.
• Australian Nov Employment data is the highlight in the Asia session today. Further out we have the ECB, BOE and SNB rate decisions as well as a slew of US data including cross-border investment, business inventories, Empire Manf, retail sales, initial jobless claims and industrial production.