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Front End Rates Stubbornly Lower

US EURODLR FUTURES
  • Eurodollars are up as much as 4 ticks in later-dated whites and 3.5 ticks in most reds despite 2Y Tsy yields only edging -0.4bps to 0.764% in today's resumption of a sizeable bear steepening.
  • The Dec’22 is up 4 ticks at 98.950 and has unwound yesterday’s sell-off whilst the Dec’23 is up 2.5 ticks at 98.330, back in the middle of today’s range.
  • The move had started prior to US data but was spurred on as surprisingly soft ISM prices paid outweighed a new high for the JOLTS quits rate, before a modest pullback potentially on less dovish comments from Kashkari (2023 voter).
  • There has been a similar story in Fed Funds futures, which have pulled back to an implied 65-70% chance of a hike at the March meeting from 70% earlier today (but 40% prior to the Dec FOMC) and back to just under 3 hikes for 2022, off from yesterday's high of 3.1.
  • There are many triggers in either direction ahead, including FOMC minutes and various service surveys starting tomorrow, durable goods and Bullard (2022 voter) speaking on Thu and of course payrolls on Fri.
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