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Markets Roundup: Curves Reverse Course, Projected Yr-End Rate Cuts Cool

US TSYS
  • Tsys remain moderately weaker, short end underperforming with curves unwinding early steeper profiles to flatter (2s10s -1.231 at -61.150). Overall volumes still rather modest (TYM3 >565k) are an improvement compared to the last couple sessions with London back on-line.
  • Additional selling partly related to IMF rhetoric over central banks (in)ability to tackle inflation until 2025 - more so than the measured comments by NY Fed Williams during Yahoo Finance interview this morning:
  • "ONE MORE RATE HIKE IS A REASONABLE STARTING PLACE BUT WE WILL BE DRIVEN BY THE DATA" followed by "IF INFLATION COMES DOWN, WE WILL HAVE TO LOWER RATES" Bbg.
  • Fed funds implied hike for May'23 up to 18.4bp, Jun'23 at +20.8bp cumulative at 5.034%, while projected rate cuts later in the year continues to cool: Sep'23 less than -7bp, November cumulative -22.4bp to 4.602%, Dec'23 40.9bp at 4.417. Fed Terminal currently at 5.025% in Jun'23.

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