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"Step-Down" To 50bp In Dec Not A Done Deal As Fed Week Begins

STIR

US rate futures are lower to open Federal Reserve decision week.

  • The OIS curve shows end-2022 hike pricing at 135bp, up a couple of basis points vs Friday and suggesting that the "step down" from a 75bp pace to 50bp at December's FOMC (which would be signalled by a 125bp pricing) remains a matter of debate. MNI's FOMC preview was published Friday and is available here.
  • Terminal Fed hike pricing creeping a little higher on OIS - peak seen in May 2023 at 4.945%, getting closer to the highest levels seen on Oct 25 just above 5%.
  • Weakness in Eurodollars is focused in reds, off 9-9.5 ticks and close to session lows. Late-2023 contracts are printing the weakest levels since Oct 25, with Dec '23 30bp below Friday's peak.
  • Attention later this morning turns to MNI Chicago PMI and Dallas Fed Manufacturing.
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