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Pre-FOMC Rally

STIR

US STIR futures have gained ahead of the start of the 2-day FOMC meeting today (our preview here). Longer-dated contracts are outperforming: Eurodollar futures dated beyond 2023 are up 13-15 ticks and gaining.

  • Gains picked up steam around 0530ET with the release of another FOMC preview article by the WSJ's Nick Timiraos, which benefited rates by not pushing back on previous dovish-leaning signals.
  • 75bp is still firmly priced for this week's hike, though cumulative pricing through December has dipped a couple of basis points: at 135bp, that implies a roughly 40%/60% split between a 75bp/50bp hike at the final meeting of the year.
  • Peak Fed funds is now seen at 4.92% in May 2023, down 6bp overnight and 8bp off the 5% session high.
  • Attention today is on ISM Manufacturing and JOLTS.

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