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STIR: Rates Rally Extends On Powell, One Of Lowest Terminals Since October

STIR
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  • US rates have extended an initial rally that continued to build after the FOMC announcement through Fed Chair Powell’s press conference with transitory talk helping.
  • Fed Funds futures suggest a first cut continues to firm up for the July decision (28bp vs 24bp pre-announce and 26bp pre-presser) whilst the 65bp of cuts for 2025 is up from 56bp pre-announce and 61bp pre-presser.
  • Cumulative cuts from 4.33% effective: 6bp May, 18.5bp Jun, 28bp Jul, 44bp Sep and 65bp Dec.
  • See the below table for a full comparison of the curve pre-announce. Note that, whilst not shown in the table, this 65bp of cuts for the year is back close to where it was before a hawkish reaction to a mixed retail sales report on Monday.
  • SOFR futures implied yields meanwhile are as much as 13bp lower in 2026 contracts, 4bp of which has come since Powell.
  • It helps leave a SOFR implied terminal yield of 3.50%, above last week’s recent lows of 3.43% but otherwise at its lowest since Oct 2024. 
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  • US rates have extended an initial rally that continued to build after the FOMC announcement through Fed Chair Powell’s press conference with transitory talk helping.
  • Fed Funds futures suggest a first cut continues to firm up for the July decision (28bp vs 24bp pre-announce and 26bp pre-presser) whilst the 65bp of cuts for 2025 is up from 56bp pre-announce and 61bp pre-presser.
  • Cumulative cuts from 4.33% effective: 6bp May, 18.5bp Jun, 28bp Jul, 44bp Sep and 65bp Dec.
  • See the below table for a full comparison of the curve pre-announce. Note that, whilst not shown in the table, this 65bp of cuts for the year is back close to where it was before a hawkish reaction to a mixed retail sales report on Monday.
  • SOFR futures implied yields meanwhile are as much as 13bp lower in 2026 contracts, 4bp of which has come since Powell.
  • It helps leave a SOFR implied terminal yield of 3.50%, above last week’s recent lows of 3.43% but otherwise at its lowest since Oct 2024. 
image