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Market Roundup: Boston Collins, 75Bp NOT Off the Table

US TSYS
Tsys turning weaker levels, looking to test overnight lows at midday, stocks paring first half gains w/ SPOX and Nasdaq weighed by Energy sector shares as crude fell over $3/bbl to 77.62 low. Crude paring losses seeing bounce off lows in stocks (SPX eminis -2.0 at 3953.25).
  • Limited reaction to existing home sales data: -5.9% less than estimated -7.1%, Oct leading indicator off more than estimated -0.4% to -0.8% MoM.
  • Tsys dipped, renewed selling after comments from Boston Fed Pres Collins that 75bp NOT off the table - adding to decline of year-end step-down expectations after StL Fed Bullard's hawkish comments early Thursday.
    Fed Dec hike pricing up to
  • Fed Dec hike pricing up to appr 55bp now priced on OIS, or about 20% probability implied or about +1.5bp today or 2.5bp since before Bullard opined on 7% rates yesterday. Recall that pricing went as low as 51bp in the aftermath of the October CPI reading. Terminal pricing relatively steady though, still just above 5% mid-2023.
  • Of note, the dip in year end policy-pivot expectations has contributed to heavy short end selling which in turn extends 2s10s inversion to new all-time low of -71.410 Friday morning. Not the case after Boston Fed Collins, however, with the spd +0.766 at -68.291 at the moment.
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