Fed Pricing Little Changed Vs. Late Friday Levels

FOMC-dated OIS pricing sees a modest dovish move in pre-NY trade, with the deeper-than-expected cut in China’s 5-Year LPR fixing and BoE rhetoric driving things thus far.

• The first 25bp cut is discounted through the end of the June ’24 FOMC.
• ~92bp of cuts are priced through the Dec ’24 meeting vs. ~90bp late on Friday.
• We still sit some distance away from recent dovish extremes after the aggressive unwind of rate cut pricing witnessed YtD.
• A reminder that markets did not want to challenge pricing of 75bp of cuts post-PPI (the move halted at ~78bp).
• this has some importance as 75bp of ’24 cuts lines up with the median Fed dot for ’24, as of the Dec ’23 SEP.
• Lower tier local data present the only points of note on the NY docket, with the Philly Fed non-manufacturing release and leading index due.
• Fedspeak is skewed towards the back end of the week, with much of that rhetoric due beyond Wednesday’s release of the Jan FOMC meeting minutes.