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STIR: Only One and A Half Fed Cuts Seen For The Cycle

STIR
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  • Fed Funds implied rates modestly extended their sharp hawkish reaction to hawkish SEP through Chair Powell’s press conference.
  • The June implied rate sits 1.5bp higher than before Powell started speaking for +10bp since the announcement/SEP.
  • Cumulative cuts from an assumed effective rate of 4.33%: 2bp Jan, 12bp Mar, 16bp May and 22bp Jun.
  • SOFR futures implied yields see the largest post-FOMC increases in Z5/H6 contracts (currently +17bps) whilst the terminal yield has climbed 13bp (when looking far out to end-2027).
  • The terminal yield of 3.96% is the lowest since May and implies just 1.5 x 25bp cuts to come this cycle.
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  • Fed Funds implied rates modestly extended their sharp hawkish reaction to hawkish SEP through Chair Powell’s press conference.
  • The June implied rate sits 1.5bp higher than before Powell started speaking for +10bp since the announcement/SEP.
  • Cumulative cuts from an assumed effective rate of 4.33%: 2bp Jan, 12bp Mar, 16bp May and 22bp Jun.
  • SOFR futures implied yields see the largest post-FOMC increases in Z5/H6 contracts (currently +17bps) whilst the terminal yield has climbed 13bp (when looking far out to end-2027).
  • The terminal yield of 3.96% is the lowest since May and implies just 1.5 x 25bp cuts to come this cycle.