/STIR: BofA Suggest Front End Pricing Reaching Limit, Feb Data Now Eyed

Bank of America write “market pricing re: the Fed in ’24 has converged to the dot plot and it will likely be difficult for the market to reduce '24 cut pricing further.”

• “Historically, the market prices more significant cuts and hikes vs what the dot plot guides, and on average this spread is around 25bps to the 1y ahead dot.”
• “The market will likely struggle to price < 75bps of cuts in '24 unless the data justify a move higher in Fed dots.”
• “While we recommend investors have patience on adding duration until 10s are closer to 4.50%, the front end may be reaching a ceiling until Feb data.”