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Markets Roundup: Extending Highs, Stocks Bounce on Balanced Fed Speak

US TSYS
  • Treasury futures extending session highs in the last few minutes after balanced comments from Fed Vice Chair Philip Jefferson emphasizing both the threat of more persistent inflation than expected as well as the possibility of a sharper growth slowdown than is currently on investors’ radar.
  • “I am particularly attentive to upside risks to inflation, such as those associated with the economy and labor market remaining too strong to achieve further disinflation, as well as risks associated with unexpected increases in energy prices,” said Jefferson.
  • Cross assets gaining: crude prices remain well bid (WTI +3.75 at 86.54), stocks recover, trading higher (SPX Eminis +18.0 at 4359.5) led by oil and gas shares as well as defense stocks on the back of the Hamas surprise attack on Israel over the weekend.
  • Rate hike projections into early 2024 continue to moderate as rates head higher: November at 14% (22.2% this morning vs. 30.5% late Fri) w/ implied rate change of +3.2bp to 5.361%, December cumulative of 6.9bp (9.9bp this morning vs. 12.4bp late Fri) at 5.398%, January 2024 4.4bp (11.9bp Fri) at 5.413%. Fed terminal slips to 5.395% in Jan'24.

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