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Fed Rate Path Reverses Pre-Weekend Softening

  • Fed Funds implied rates have overnight reversed most of Friday’s decline, with little by way of headline drivers to offset a lack of meaningful regional escalation in the Israel-Hamas conflict plus a latest BoJ sources piece.
  • Cumulative hikes: +0.5bp Nov, +5.5bp Dec and +9.5bp Jan to a terminal 5.43%.
  • Cuts from terminal: 26bp to Jun’24 and 74bps to Dec’24, the latter off Friday’s close of 80bps having closed mid last-week at 66.5bp for fresh lows of recent months.
  • The Fed is in media blackout, with upcoming FOMC appearances including Chair Powell on Wed strictly limited to non-policy opening remarks.

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