Federal Reserve: How Are Guidance and Yield Curve Pricing Linked? – Rabobank

A bear-flattening move in US Treasury yields persisted ahead of the FOMC, according to Rabobank’s Global Daily, while OIS pricing indicated virtually no prospect of a rate hike at this meeting. Market pricing still implies nearly one full hike by December, followed by another by Q3 next year. For Rabobank’s Philip Marey, the expected path is an October hold followed by a December hike, with rates then remaining at 4.25% through 2027.

What do yield dynamics signal about FOMC expectations?

"US Treasury yields moved in a bear flattening move yesterday, continuing the trend from earlier this month, in anticipation of today’s FOMC meeting."

"OIS curve implied pricing suggests the likelihood of a hike is pretty much off the table, with only around 1.7bp priced in, but all eyes will be on Kevin Warsh’s fourth press conference as Fed Chair, and be looking for forward guidance."

"The market has almost one full hike priced in by December of this year and another full hike by Q3 next year."

"We are forecasting a hold at the October meeting, followed by a hike in December, and then a hold at 4.25% through the end of 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)