Market Expectations on Fed funds, Spreads, Inflation post-CPI Launch
Decrease on Fed funds at February assembly. Don’t see a lot motion on spreads, regardless of discuss of a pivot, and the opportunity of a tender touchdown.
Determine 1, Prime Panel: Efficient Fed funds (black), and CME FedWatch implied for February 1 assembly, as of 1/13/22 (tan sq.), 1/7/2023 (sky blue circle), 12/14/2022 (crimson triangle); Center panel: Ten 12 months – three month unfold (blue), ten 12 months – two 12 months unfold (crimson); Backside panel: 5 12 months Treasury – TIPS unfold (inexperienced), unfold adjusted for threat and liqudity premia (sky blue). Supply: Fed, Treasury through FRED, and KWW following D’amico, Kim and Wei (DKW) accessed 1/14, CME FedWatch accessed 1/14, and creator’s calculations.
