Fed Rate-Cut Odds Surge Again

• Weekend remarks from NY Fed President Williams set a dovish tone, and Fed Governor Christopher Waller added to that momentum, signalling that additional easing in December remains firmly on the table.
• Waller emphasised the weakening backdrop, saying, “The labour market is soft. It’s continuing to weaken”, and made clear he intends to support a cut at the upcoming meeting.
• Market pricing swung sharply in response: expectations for a December 25bp cut surged past 60% after Williams’ comments and have now climbed to above 70%, a dramatic turnaround from below 30% just last week.
• US Treasury yields moved lower on the shift in expectations, with the 10-year down 2bps to 4.04% and the 2-year easing 1bp to 3.51%.
• It’s a quiet day domestically, while in the US we finally get the delayed September Retail Sales and PPI prints. Though questions linger about how meaningful the lagged data will be.