The implied odds of a Federal Reserve rate increase in June have increased according to Fed futures pricing, as a preliminary debt ceiling deal struck over the weekend added gasoline to the fire of higher-than-expected PCE inflation and Fed hawkish statements of last week.
CME Group's FedWatch tool currently assigns a 60% probability to a 25-basis-point hike to 5.25%-5.5% in June, and there is a non-negligible 25% chance of a similar hike to 5.5%-5.75% in July.
Some experts have cautioned raising the debt limit would result in a massive increase in the issuance of Treasury securities, as a barely empty Treasury cash balance is approaching the X-date.
As a catastrophic U.S. default is avoided, many market investors perceive the supply of bonds flooding the market to cover fiscal costs as a green signal for the Fed to maintain its tightening bias.
Cleveland Fed President Loretta J. Mester said last week that "PCE data underscores slow progress on inflation" and suggested the "Fed has more work to do."
Cristopher J. Waller, a member of the FOMC's board of governors, stated the decision to raise interest rates in June will depend on the data coming the next three weeks.
All Eyes On The Job Market Report: The major economic event this week is the release of the May labor market data, which is scheduled for Friday.
Nonfarm payrolls are expected to fall from 253,000 in April to 190,000 in May, according to economists' consensus, while the jobless rate is expected to go up slightly, from 3.4% to 3.5%.
On the wages front, workers' salaries are expected to rise by 0.3% in May, which is less than the 0.5% increase seen in April.
The policy-rate-sensitive Ishares 1-3 Year Treasury Bond ETF SHY has lost nearly 1% over the past two weeks and has retraced back to mid-March levels.
Photo: Unsplash
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
