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$-Bloc Easing Expectations Scaled Back


Expectations for year-end easing in U.S. STIR have been reduced by 40 basis points this week, as banking concerns have eased. Off a terminal rate expectation of 4.96% (a 57% chance of a 25bp hike at the May FOMC), the market had priced in 56bp of easing by year-end at the close of NY trade.

  • Similarly, Canadian STIR has reduced year-end easing expectations to 40bp from 78bp at the end of last week.
  • Meanwhile, AU and NZ STIR have seen relatively modest cuts in easing expectations over the week, with reductions of 12bp and 10bp respectively, ahead of rate decisions by the RBA on Tuesday and the RBNZ on Wednesday.
  • Expected year-end easing in AU and NZ is however based on higher terminal rate expectations (+6bp in AU and +13bp in NZ).

Figure 1: $-Bloc STIR: Terminal Rate Expectations & Year-End Pricing

Source: MNI – Market News / Bloomberg

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