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Rally Extends As Terminal Hike Pricing Fades Further

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Yields are down across the major curves early Tuesday, with the short end outperforming in a (mostly) bull-steepening move.

  • The RBA's decision to scale down rate hikes in its decision overnight (25bp vs 50bp expected) has kept downward pressure on central bank terminal rate expectations. Fed rates are seen getting to a peak of just below 4.4% in March, vs closer to 4.5% at end-Sept and 4.8% highs early last week.
  • This has helped risk assets rally with the USD remaining under pressure; periphery EGB spreads are tighter too.
  • Once again it's the UK long end underperformance that sticks out: today, a very weak Oct-61 Gilt auction (widest tail since 2018) pushed 30Y yields above 3.90%.
  • Up later today are US durable goods data, Fed speakers including Daly, Jefferson, Logan, Mester, and Williams, with ECB's Lagarde appearing as well.

Cash yield update:

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Yields are down across the major curves early Tuesday, with the short end outperforming in a (mostly) bull-steepening move.

  • The RBA's decision to scale down rate hikes in its decision overnight (25bp vs 50bp expected) has kept downward pressure on central bank terminal rate expectations. Fed rates are seen getting to a peak of just below 4.4% in March, vs closer to 4.5% at end-Sept and 4.8% highs early last week.
  • This has helped risk assets rally with the USD remaining under pressure; periphery EGB spreads are tighter too.
  • Once again it's the UK long end underperformance that sticks out: today, a very weak Oct-61 Gilt auction (widest tail since 2018) pushed 30Y yields above 3.90%.
  • Up later today are US durable goods data, Fed speakers including Daly, Jefferson, Logan, Mester, and Williams, with ECB's Lagarde appearing as well.

Cash yield update:

Keep reading...Show less