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Further Modest Unwinding of BAX Inversion

  • BAX implied yields drift lower in near-term contracts but chip away at yesterday’s substantial US CPI rally in 2023 led by the Jun’23 +3bps.
  • With little headway made in front rates on the day, the crudely implied policy rate is seen peaking at the upper end of the 3.25-3.5% range in the Dec’22 having got to 3.5% or a little above prior to CPI.
  • The curve remains heavily inverted but at 50bps of cuts through BAZ2/BAZ3 has seen a notable unwinding from the 75bps at the end of July, with a broadly similar trend in the Eurodollars equivalent as longer-term real yields shift higher again.

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