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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.
STIR
Overnight the Federal Reserve hiked 25bp but noted that future increases might depend on the effects of the recent financial turmoil on the economic outlook. The dot plot however was unchanged from December with a peak of 5.1% in 2023. That said, ahead of recent banking concerns, messaging from Fed Chair Powell suggested larger hikes and a higher terminal rate. Terminal rate expectations reached a peak of 5.69% in early March versus its current level of 4.93% (-75bp).
- In line with US STIR, $-Bloc terminal rate expectations have tumbled since early March with AU -77bp, NZ -46bp and CA -33bp.
- Given the more conditional Fed policy outlook linked to tighter credit conditions, it is hard to argue too vigorously against current terminal rate pricing.
- What is harder to support however is the case for policy easing this year. The FOMC decision statement and press conference certainly didn’t give any hint of easing this year. Despite that, US STIR has 72bp of easing priced by year-end.
- In the $-Bloc as well where the case for policy easing this year is weak based on the timelines for inflation returning to their respective targets, STIR pricing has 67bp of easing priced in CA, 32bp in AU and 24bp in NZ.
Figure 1: $-Bloc STIR: Terminal Rate Expectations & Year-End 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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