Hawkish Adjustments Seen In Fed Pricing On IJC, Yesterday’s Ranges Intact

Hawkish adjustments seen in Fed funds futures following the lower than-expected weekly initial jobless claims release.

• Yesterday’s hawkish extremes are untested at this stage, with the noisiness of the data noted by many.
• Sep FOMC-dated OIS shows ~45bp of cuts vs. 47bp heading into the data.
• Meanwhile ~106.5bp of cuts are priced through the December meeting vs. 113bp pre-data.
• While some question the size of the post-data move, particularly given the aforementioned “noisy” nature of the readings, we note the recent build up in long Tsy and received STIR positions is a potential contributory factor here.
• Zooming out, the pricing of cuts still seems aggressive at this stage, but a run of less dovish data and/or a turn in broader macro sentiment is probably required to trigger a further unwind of some of the easing currently priced in.
• There is little in the way of tier 1 risk events scheduled for the remainder of this week, with next week’s CPI (Wednesday) & PPI (Tuesday) readings set to provide the next major U.S. data points of interests.