LIVE MARKETS-What U.S. swaps traders think about rates

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WHAT U.S. SWAPS TRADERS THINK ABOUT RATES

Markets may still be pencilling in about two Fed rate cuts for this year, but the 25 basis point slide in U.S. 10-year Treasury yields in February shows investors are growing more confident that more aggressive easing might lie ahead.

“We can only deduce from the overnight index swap (OIS) market still pricing in 50 bps of rate cuts is that traders expect a 'dovish' structural shift coming at the Fed once the new Chairperson arrives at the Fed, presumably, Kevin Warsh,” says Thierry Wizman, global forex and rates strategist at Macquarie Group.

“In the back of the market's mind may be the premise also that the Fed may be willing to let the economy ‘run hot’ and enable more AI investing via cheap financing, in order to advance the disinflationary and productivity benefits that will come when AI is deployed at scale by 2028,” he adds.

Economists at Barclays say markets are now pricing in a delayed, but deeper, easing cycle in the U.S..

“We think that is justified given the combination of data so far less need for insurance cuts in the near term, upside risks to nominal GDP growth abating, medium-term inflation outlook improving, and risk of fiscal slippage,” they say.

(Stefano Rebaudo)

EARLIER ON LIVE MARKETS:

EUROPE'S GREEN SHOOTS CLICK HERE

STRONGEST MONTH SINCE MAY CLICK HERE

EUROPE BEFORE THE BELL: FUTURES HIGHER AT MONTH-END CLICK HERE

AI WOES AND 'OPEN WAR' CLICK HERE