The Historic Moves Continue
Sometimes a chart says it all. The fallout from the collapse of SVB leaves Fed-dated OIS pricing ~15bp of tightening for next week’s meeting, ~30bp below the peak that was seen last week after Fed Chair Powell put a 50bp hike well and truly on the table (Monday saw Nomura become the first to call for a cut at the gathering, while several notable sell-side names now look for no change). Terminal rate pricing sits at 4.77%, which means that one further 25bp hike from current rate levels is not fully priced, with peak rate pricing now rolled forward to May. Further out, the OIS strip is now pricing over 90bp of rate cuts by year end (from the terminal rate). The scale of these moves is truly historic. Tuesday’s CPI release presents the immediate event risk on the data side (see our full preview of that event here).
Fig. 1: Mar, Sep & Dec ’23 Fed-Dated OIS (%)
Source: MNI - Market News/Bloomberg