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SOFR Futures Update

  • SOFR futures are well off knee jerk lows on wide 0.10-0.11 ranges after the BOE's 50bp rate hike to 5%. More surprising than the higher than expected rate hike, is the rebound as markets see the move to address inflation as late in the cycle, ergo bringing forward timing of a rate cut. Caveat: lack of meaningful forward guidance from the BOE said to limit hawkish reactions.
  • Front month Jun'24 SOFR futures are holding +0.0025 at 94.7725 after 3M SOFR settled +0.01713 to 5.24626 (+.03942/wk). The balance of Whites (SFRU3-SFRH4) are trading -0.010-0.035, Reds-Golds (SFRM4-SFRH8) -0.040-0.015.
  • Projected 25bp rate hike at one of the next three FOMC meeting gains later in the year. Market confidence of a hike at the July 26 FOMC steady around 72% with an implied rate of +17.9bp to 5.262%, September and November pricing in appr 92%-100% with cumulatives of +23bp and 25.5 respectively at 5.31-5.339%. Dec'23 cumulative climbs to 17.7bp at 5.261%.
  • Fed terminal at 5.34% in Nov'23 this morning.

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