00:00What signals are you going to be looking out for in this meeting, apart from the rate cut that is largely priced in?
00:06Yeah, I mean, it's really about the tone that they're setting for next year and whether we feel that that love that is the Fed put and how open minded they'll be to supporting should they should they need to support.
00:19And, you know, I think that's where the two way risk in rates pricing comes for next year.
00:22So I don't think we're going to see any changes to the dots. I don't think we're going to see any changes to the statement of SEPs.
00:29I think, you know, I think power will basically come out and say that they're open minded towards moderate cuts if they're needed.
00:35But obviously the barriers to do so are much higher these days. We're going to see the formal end to the recalibration phase.
00:42And so I think, you know, if you have a look at the FX vol market, that one week volatility across the dollar pairs is generally below the 20th percentile.
00:51It's very low. So the FX markets are not expecting the dollar to have a significant move.
00:55Gold's a little bit higher, but then obviously it's had a big run and positioning is very, very rich in that.
01:00And if you look at the S&P forward vol markets, they're pricing at a point 80 percent up or down move on for the Fed day.
01:07So that's kind of in line with the sort of realized vol we've seen over the last eight quarters as well.
01:12So, yeah, the markets are not expecting fireworks from this.
01:15And I think it's so conditional that, you know, the rate cuts priced in, you know, everyone's everyone's positioned for this hawkish cut and there's going to be no changes to S&Ps and stuff, various factors.
01:24So, you know, I think as long as they're open minded to to further cuts, if they're needed to happen, then I think we're OK with that situation.
01:33And we can plod on and we can obviously look to see what happens with Oracle's earnings, Broadcom's earnings and next week with the payrolls and CPI.
01:40So market is expecting a pretty low, low impact event, even through the significance of what this obviously carries.
01:48Yeah, I mean, clearly, Chris, David here, by the way, they're clearly looking past this.
01:52And you look at how how poorly treasuries have been trading, how, you know, the curve's been steepening.
02:00Is there some element here that the markets are not just looking through this, but are somewhat expecting that the next move could actually be a rate hike here out of the Fed?
02:10I mean, might that be not just a tail risk at this point?
02:14It's a tail risk.
02:15Yeah, absolutely.
02:16I mean, but I and if you look at the distribution, if you look to the full distribution of rates pricing, I'm sure there are people betting on the next move being a hike.
02:25But that would be a surprise to where the sort of weight of money is at the moment, because, yeah, as everyone sort of says, is that the next move is expected to be in June.
02:34And, you know, we might get one more by the end of the year.
02:37That's the sort of but that rates pricing is dynamic and it can move very, very sharply.
02:40If we were to get a strong payrolls number next week, you know, I think above sort of 80,000 would probably constitute that the break even rates around sort of 40,000, 50,000 on that payrolls number.
02:53And we would see, you know, the unemployment rate stay fairly firm.
02:56And, you know, we look at inflation next week.
02:59And then obviously, yeah, if we were still core, core inflation pushing up above 3.1 percent, then, yeah, I think people would come into 2026 thinking, you know, is that is that is that two more cuts really the right right call?
03:11And of course, you know, then you've got this this mountain of issuance that's going to be coming through through government bond markets, probably not so much for the Fed, where most of it's going to come from the bill side of things.
03:20There's certainly in Europe and Japan and, you know, you've already seen curves long end, you know, moving up quite sharply, which is put some upside in the treasury market as well.
03:30But, yeah, I think there's really clearly two way risk at the moment for rates pricing further out the curve.
03:35I think it's interesting that the terminal pricing has had a material shift recently.
03:39You know, it's gone from it's moved up about 41 basis points in the last month or so.
03:43So, yeah, 323 is the sort of terminal pricing.
03:46And I think people are sort of massaging that that that that position there as well.
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