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Fed Rate Path Slips Back as Funding Stress Builds Again

STIR
  • The latest risk-off push has seen a full reversal of the earlier bounce in Fed rate expectations.
  • It’s now back to pricing a 34bp hike for the March FOMC whilst the terminal has been pulled forward to another meeting, with a cumulative 73bp to 5.29% with the Jun FOMC (it landed with the Sep FOMC at ~5.65% two days ago).
  • June FRA/OIS is back at session and YTD highs of 30bps, up 14bps on the day vs somewhat sustained 2022 highs of 35bps and an outright high of 50bps.

FOMC-dated OIS implied rate for June (white) and July (yellow) meeting. June FRA/OIS (green)Source: Bloomberg

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