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STIR
$-Bloc STIR softens after lower than anticipated US CPI data, despite a 25bp hike from the BoC.
- US headline inflation declined from 4% y/y to 3% y/y (3.1% est) in June, marking the slowest rate of inflation since March 2021. Core inflation also fell short of expectations at 4.8% y/y with core services ex-rent printing a modest annualized growth rate of 2.9% during the three months leading up to June.
- The CPI report led the market to think that the forthcoming 25bp hike from the Federal Reserve would be the final one. The market places the chance of a July Fed hike at 90%, but the odds of further hikes softened. November cumulative tightening eased to 29bp from 35bp.
- BoC Governor Macklem said Wednesday he's getting close to rebalancing the economy with monetary policy restraining a stronger-than-expected expansion, and it "made sense" to pause rate hikes earlier this year before returning this week with a second straight tightening, as generally expected. Terminal rate expectations were little changed at 5.13%.
- RBNZ dated OIS pricing is 1-7bp softer across meetings today, with terminal OCR expectations at 5.56% versus 5.69% before yesterday’s decision by the RBNZ to leave policy unchanged.
- RBA-dated OIS pricing is 4-9bp softer beyond November with terminal rate expectations at 4.44%, the lowest since early June.
Figure 1: $-Bloc STIR: Terminal Rate Expectations & Mar’24 Pricing
Source: MNI – Market News / Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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