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Pricing Of Fed Cuts Moderates On NFP Report, Headline & Strong Wages Dominate

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The stronger parts of the NFP survey dominate when it comes to initial market reaction, with hawkish repricing being driven by the much firmer-than-expected NFP release and strong wage numbers.

  • FOMC-dated OIS now shows ~39bp of cuts through year end vs. ~48bp ahead of the data.
  • Further forwards, ~14bp of cuts are now priced through the Sep FOMC vs. ~21bp heading into the release, while a 25bp cut is no longer fully priced through the Nov FOMC (~22bp of cuts are priced through that juncture).
  • A reminder that we noted that recent positioning adjustments and the move away from hawkish cycle extremes meant that the pre-data market setup presented greater two-way risk than what was seen just a few short weeks ago (when the same measures provided dovish risks).
  • Particular focus falls on SFRM4 in the wake of yesterday’s notable buying of that contract, with the contract ~3bp lower in the time since the data crossed.
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The stronger parts of the NFP survey dominate when it comes to initial market reaction, with hawkish repricing being driven by the much firmer-than-expected NFP release and strong wage numbers.

  • FOMC-dated OIS now shows ~39bp of cuts through year end vs. ~48bp ahead of the data.
  • Further forwards, ~14bp of cuts are now priced through the Sep FOMC vs. ~21bp heading into the release, while a 25bp cut is no longer fully priced through the Nov FOMC (~22bp of cuts are priced through that juncture).
  • A reminder that we noted that recent positioning adjustments and the move away from hawkish cycle extremes meant that the pre-data market setup presented greater two-way risk than what was seen just a few short weeks ago (when the same measures provided dovish risks).
  • Particular focus falls on SFRM4 in the wake of yesterday’s notable buying of that contract, with the contract ~3bp lower in the time since the data crossed.