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Fed Cuts Pricing Mainly Trimmed Through 2H23

STIR FUTURES
  • The Fed Funds implied terminal rate is holding 10bps higher on the day (8bps post-payrolls, pre-ISM) with 42bps of hikes to an effective 5% and an end-2023 rate up 18bps (14.5bps pre-ISM) at 4.58%.
  • 2H23 rate cuts have been trimmed 8bps to 42bps from 50bps between the FOMC presser and payrolls, and vs 44bps prior to the FOMC decision.
  • SOFR futures suggest this is where the bulk of the trimming of cuts has been centred, with 2024 inversion actually increasing slightly on the day with SFRZ3/Z4 at -1.465 (-0.015) and vs Tuesday's pre-FOMC close of -1.395.

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