CBOT: Micro 2-Year Yield ( CBOT_MINI:2YY1! ) and Micro 10-Year Yield ( CBOT_MINI:10Y1! )
The recent US inflation cycle started in June 2020. As the global pandemic interrupted the global supply chain, the prices of goods began to rise rapidly. In the following two years, the headline CPI shot up nearly nine percent to a 40-year high.
The Federal Reserve initially...
We return to Fed Fund Futures, as the market has been repricing interest rate cut expectations. At the beginning of the year, there were 150bps of cuts expected by the market on the premise of a weaker economy, falling inflation, and a softer labor market. However, none of these expectations have materialized. The market has settled into a middle ground ahead of...
After a disappointing labour market report last week, where a blowout nonfarm payrolls print was overshadowed by rather dismal details in the household survey, focus now turns to the February US CPI report, being the last significant piece of the data jigsaw before the March FOMC meeting.
Off the back of hotter than expected inflation figures in January, with...
Well, what a turnaround it’s been. Just 57 days ago, markets were flat-out ignoring what the FOMC were saying on the policy outlook, and pricing as many as six 25bp rate cuts over the course of the year ahead. Now, less than two months later, the swaps are in line with the dots, as we see money markets implying just 75bp of easing this year, with the first 25bp...
In January 2024, the market had priced in more than 150 basis points worth of interest rate cuts. This suggested six 25-basis-point cuts throughout the year. Market participants believed that economic weakness was on the horizon, thus pricing in more cuts than the Fed’s Summary of Economic Projections (SEP).
Why the Change?
The continued strength of the labor...
London is cold, wet, and grey at present – rather typical of your average British winter. I hope, then, that you’ll forgive me for looking ahead to the brighter summer months, particularly as financial markets are beginning to do the same.
Even after a hotter-than-expected January US CPI report, money markets continue to price a ‘summer of rate cuts’. Though...
Recent price action in the CME's 30-day Fed Funds Futures has ruled out one cut for 2024. As of the end of 2023, the spread between the front-month Fed Funds Futures and the deferred (December) ones indicated a 150-155 basis points spread, suggesting that the markets were anticipating six cuts in 2024. However, recent developments have prompted a reevaluation,...
January-2025 Fed Funds Futures (FFF) contract is one of the indicators that reflects the big increase in the soft landing scenario as the market is beginning to expect rates to fall.
CME: Micro Russell 2000 ( CME_MINI:M2K1! )
Global financial market orbits around Federal Reserve’s interest rate decisions. By concept, hiking interest rates means monetary tightening while cutting them signals easing. In reality, market perception to the Fed actions evolves over time, sometimes blurring the difference between “good news” and “bad news”.
• On May...
CME: Micro Russell 2000 ( CME_MINI:M2K1! )
On August 25th, Federal Reserve Chair Jerome Powell delivered his annual policy remark, “Inflation: Progress and the Path Ahead”, at the Jackson Hole Symposium.
The message is very clear: It is the Fed's job to bring inflation down to the 2% policy goal. The Fed is prepared to raise rates further if appropriate and...
Consensus data,
Headline inflation 3.3, Core CPI 4.8
Scenario 1
If the data prints higher than expected that is core CPI at 5.0 and Headline inflation at 3.5 market participants might interpret inflation as being sticky this will influence them to price for another rate hike either in September or November pushing the fed funds rates to the range of 5.5 – 5.75...
Next week is the FOMC rate decision and the markets are pretty confident that there will be no change from the group according to Fed Funds futures (subtracting the contract value of the time frame we are looking for from 100 gives you the loose implied rate).
Interestingly though, the OECD said this morning it expects the Fed to peak at 5.25-5.50 percent which...
Gold is in beast mode - we eye the 2022 and ATHs at $2070 and $2075 respectively and scalper aside it's hard to bet against the momentum play right now
The USD is finding few friends and the ST bear trend is a massive tailwind for gold. We've seen US yield curves looking like they will resume bull steepening and rate cuts are once again being priced into OIS and...
To all the perma bulls out there, look at bonds, there won't be any pivot till higher interest rates at or above 6%.
Bonds risk-off is the most important out there, as the bond market is much bigger than the stock/indexes market.
Something will have to give, either bonds or the markets...
TLT is approaching a technical double top area as the Feb. 1st FOMC meeting looms. Fed futures are currently pricing in a 475-500 bps terminal rate, however some fed speakers over the days have indicated a desire to exceed 500 bps this year. Market thus far hasn't bought that narrative and expects the Fed will be forced to pivot later this year due to...
