November 14, 2022 20:38 GMT
Terminal Rates vs. Pace of Rate Hike Step-Down
Tsys moderately weaker after the bell, upper half of session range as focus remains on Fed speak and inflation metrics after last Thu's softer than anticipated CPI.
- Fed Gov Waller eco-outlook from Australia last night: ""We're at a point we can start thinking maybe of going to a slower pace," Waller said, but "we're not softening...Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there" DJ reported.
- Rates bounced after Fed VC Brainard eco-outlook comments: "PROBABLY APPROPRIATE TO SOON MOVE TO SLOWER HIKE PACE".
- Flipside: jump in median inflation expectations (1-Year: 5.94% in Oct vs 5.44% Sep) in the NY Fed's consumer survey looks largely a result of a rebound in food and energy price expectations.
- Short end selling evaporated after the Brainard comments, Fed funds implied hike in Dec'22 steady at 50.9bp, Feb'23 cumulative 86.9bp to 4.717% vs. 86.9bp earlier, terminal slips to 4.93% in Jun'23 (5.08% pre-CPI).
- Current 2-Yr yield is up 7.6bps at 4.4077%, 5-Yr is up 6.8bps at 4.0055%, 10-Yr is up 6.4bps at 3.8761%, and 30-Yr is up 4.7bps at 4.0625%.