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Market Roundup, Aggressive Hike Estimates Cools Slightly

US TSYS
Both FI and equity markets finished higher Friday as expectations of more aggressive rate hikes for the year cooled somewhat after MN Fed Pres Kashkari (dove, non-voter) spoke.
  • First out of Blackout, Kashkari said while a "March hike is likely" .. the Fed "could pause after spring."
  • In a second appearance on Yahoo finance, Kashkari said there is some value in adjusting rates in the near future; conceivable FOMC could move in the spring and then pause.
  • Kashkari doesn't want to use terms like "gradual" or "deliberate" for the path ahead, as "too much is outside our control", and the Fed needs more information before deciding what they'll do a few months from now.
  • Tsys see-sawed higher across the board, 30YY -.0196 to 2.0733%, 2s10s yield curve gained .628 to 90.695, and 7s10s remains above inversion at 2.659.
  • Equities finished near highs, SPX eminis +105.5 at 4423.25.
  • Short end: Eurodollar lead quarterly EDH2 remains under pressure (-0.035 at 99.455) after latest 3M LIBOR set' surged +0.01757 to 0.31657% (+0.05886/wk) -- new highest level since May 2020.
  • Debate over size and speed of liftoff: some dealers, Nomura for example, expect a 50bp hike in March, while Wells Fargo sees 25bp hike in May adding to four quarterly hikes (+125bp/yr).
  • Policy uncertainty/inflection point remains Green Dec'24 (97.910) inverted vs. most of the Blues (EDH5-EDU5) -- steady vs. Blue Dec'25.
  • The 2-Yr yield is down 2.6bps at 1.1623%, 5-Yr is down 4.6bps at 1.6127%, 10-Yr is down 3bps at 1.7695%, and 30-Yr is down 2bps at 2.0733%.
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