Waller Comments Help Maintain Removal Of Rate Cut Premium

FOMC-dated OIS is little changed to ~2bp firmer across ’24 contracts, painting a similar picture to yesterday’s closing levels after a fresh unwind of some rate cut premium.

• Pushback from the Fed re: the need for imminent cuts, most recently via Governor Waller during Asia-Pac hours, continues to dominate headline flow, factoring into market pricing.
• Goldman Sachs have subsequently delayed their call for the first Fed cut to June from May, with their terminal rate call unchanged, sitting in the 3.25-3.50% target range.
• FOMC-dated OIS currently shows ~19.5bp of cuts through the June ’24 FOMC meeting, leaning towards, but not fully pricing, a 25bp cut.
• Further out, the first 25bp cut is more than fully discounted come the end of the July ’24 FOMC, with ~78bp of cuts priced over ’24.
• That leaves Goldman’s ’24 cutting view as a little more aggressive than market pricing.
• The median dot in the Fed’s Dec SEP showed 3 cuts in ’24 and participants have been unwilling to test that marker as of yet.
• The U.S. docket is slim to finish the week.