• Meanwhile in markets, bond yields and Fed rate hike pricing have returned to their cyclical peaks ahead of Wednesday’s all-important FOMC meeting. Equities are looking even worse on the charts while commodities are still marching higher despite continued dollar strength.
  • Ahead of Powell & Co, futures and OIS have priced in 169bps of hikes for the next three meetings. Excluding the 50bps that everyone expects on Wednesday, that means that a three quarter basis point hike is halfway being priced in. US 5-year, 10-year and 30-year Treasury yields are all trading slightly below 3 percent, while the 2y is *only* at 2.73 percent. With the Quantitative Tightening shock priced in (for now, see more below), expect the curve the resume flattening as rate hike-induced curve flattening as old as Jerusalem.

 

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