FOMC-Dated OIS Shunts Lower

The latest round of PacWest worry, coupled with the softer than expected round of U.S. PPI data and the larger than expected uptick in the weekly initial jobless claims reading sees FOMC-dated OIS pull lower, resulting in 12bp of cuts being priced into the FOMC-dated OIS strip come the end of the Fed’s July meeting (vs. prevailing SOFR levels), with ~30bp of cumulative cuts priced through the end of the September FOMC, a cumulative ~82bp of cuts priced through the end of the year and nearly 110bp of cumulative cuts priced through the end of the Jan ’24 FOMC.

• A quick reminder that WSJ “Fed whisper” Timiraos posted his latest piece on Wednesday afternoon (NY time), noting that “Federal Reserve officials were already leaning toward taking a summer vacation from interest rate increases to see if they have done enough to slow the economy and inflation. Wednesday’s inflation report makes that easier because it showed price pressures aren’t worsening and might soon be slowing as muted growth in rental-housing costs feed through to official inflation gauges.”