HALISTER1: Market May Struggle to Price in More Than 2.5 Fed 2017 Hikes: CS

Market May Struggle to Price in More Than 2.5 Fed 2017 Hikes: CS

(Bloomberg) -- “We doubt that the market will price much more than the 2.5 hikes already priced into 2017”; one reason is such pricing would strengthen trade-weighted USD, Credit Suisse analysts led by Praveen Korapaty wrote in note on Monday.
  • Fed is “sensitive” to USD; markets remain aware of “dampening impact” of USD strength on pace of hikes, absent an inflationary “uptrend”
  • CS sees room for more hikes in 2018 since that will be first year when deficit spending should be “fully ramped”
  • Will be hard for 10s and 30s to keep up with selloff in the belly or front end, without a reassessment of term premia
    • Such a reassessment is likely to come only after size, scope of Trump’s fiscal plans become clear
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Praveen Korapaty (Credit Suisse Group AG)

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