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Projected Summer Rate Hike Cools Post-ISM

  • Rebound in rate futures following the disinflationary ISM services miss, curves rebound with short end rates outperforming (2s10s taps -77.212 high). This morning's projected pause at next week's FOMC and 25bp hike at either July or Sep have cooled:
  • Fed funds implied 25bp hike on the June 14 FOMC at 5.5bp vs. 6.6bp earlier, July cumulative +16.8bp vs. +20.9bp to implied rate of 5.258%. September cumulative at +14bp vs. +19.1 at 5.220%.
  • Chances of a 25bp cut at year end gains: Dec'23 cumulative -14.3bp from -5.4bp at 4.933, Jan'24 now fully pricing in a 25bp cut and then some: cumulative -33.9bp at 4.748%. Fed Terminal slips to 5.26% in August vs. 5.295% this morning.

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