Fed's Waller, Bullard Tamp Down 100Bp Hike Pricing

Rates trading weaker after the bell -- are well off first half lows after Fed Gov Waller tamped down on mkt pricing in chance of 100bps hike at the end of the month following Wed's "major league" CPI.

• Short end Fed Funds and Eurodollar futures gapped higher on Fed Gov Waller comments that he supports another 75-basis point increase at the July 26-27 FOMC meeting, bringing the fed funds rate to 2.25% - 2.5%.
• Sidebar: StL Fed Bullard also said he favored a 75bp hike at the end of the month. On Wednesday, Sep'22 Eurodollar futures settled -0.300 to 96.385 as markets reacted to hot Jun CPI inflation data, extending the move late after Fed's Bostic said "everything In play for future policy decisions".
• Waller judges that level is close to neutral," he said. "I think that estimates of the real federal funds rate should be based on the expected policy rate one to one and a half years in the future."
• Though June CPI may have "anchored" Waller's 75bp hike expectation in a couple weeks, He would "lean toward larger, full-point" hike if "retail sales, housing data are 'materially stronger than expected' Rtrs reported.
• Heavy data focus Friday includes Retail Sales MoM (-0.3%, 0.9%); ex-Auto (0.5%, 0.7%), Import/Export Prices, Cap-U/IP, UofMich Sentiment. Expect more Fed speak with policy blackout starting Fri at midnight. Sock earnings continue: Bank of NY Mellon, Wells Fargo, Citi Group, Blackrock, State Stree and US Bancorp on Friday.