Fed: Market will need to focus on the next hike - ANZ

In view of the analysts at ANZ, the shift of market pricing from under 50% to 100% for a March hike in less than two weeks has also delivered a rise in long end yields of 25bp which takes yields to within 5bp of the highs of the cycle in the aftermath of the US election.

Key Quotes

“Volatility remains low (the Fed has become quite adept at managing the process), while credit spreads remain near the tightest levels post financial crisis. Beyond the March meeting, the market will need to focus on the next hike, a convergence between soft and hard data, core and headline inflation and more technical factors like central bank liquidity via balance sheet activity. We see this manifesting itself in steeper curves and wider credit spreads.”