Short end rates have undergone...>

US EURODLR FUTURES: Short end rates have undergone a lot of upheaval this month

in their attempt to assign a probability to various rate cut scenarios for the

next FOMC on July 30-31. What is likely to be the first rate cut since December

2008, a 25bp rate cut has remained fully priced in for weeks, while the chances

of a more significant 50bp cut continue to ebb and flow.

- Chances of a 50bp cut in rates were zero after the unexpectedly strong June

employment data (+224k) on July 5, climbed to 25% in the wake of Fed Chairman

Powell's semi-annual testimony two weeks ago, and surged to 56% last week after

markets misinterpreted New York Fed President Williams' "academic" message on

"Living Life Near the ZLB".

- Amid generally quiet midsummer trade coupled with the Fed entering their

blackout period last Saturday, chances of the outsized drop in the target rate

has stubbornly declined to approximately 25%.

- For the week: Lead quarterly EDU9 has dropped 0.095 to 97.81, EDZ9 through

EDM0 are 0.090 lower. Compared to week-ago levels, Whites (U9-M0) are

0.085-0.060 lower, Reds (U0-M1) through Golds (EDU3-EDM4) 0.055-0.010 lower.