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Money markets ramp up global rate hike bets

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Global Business Review Magazine
Saturday, June 10, 2023
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Money markets ramp up global rate hike bets

Money markets ramp up global rate hike bets

As inflationary pressures mount worldwide, money markets are charging ahead with pricing aggressive interest rate rises. Energy prices at multi-year highs and relentless supply chain snarls have raised fears of a future inflation spike. Norway and New Zealand have become the first developed countries to lift rates as economies recover from the pandemic crisis.

And hawkish shifts at the Bank of England and the U.S. Federal Reserve led investors to believe rate hikes are around the corner. The interest rate futures are rapidly ramping up rate-hike bets. Britain has seen some of the biggest moves with 19 basis points. This is worth of tightening priced for the BOE. For the Fed and the European Central Bank, end-2022 rate hikes are 100% and 90% priced respectively. The messages are often in conflict. This is with those from central bankers.

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They are at odds with signals from other market segments. Most analysts say market pricing is aggressive, especially so in regions such as the euro zone where policymakers have downplayed inflation risks. Peter Schaffrik, global macro strategist at RBC Capital Markets said that what the market has learned about the Fed or BoE is that they have their guidance but when push comes to shove, they go back to the mantra of rate hikes. BoE, Norges Bank, are all shifting and markets are saying the ECB can’t be the odd one out. While some rate hike expectations have been fueled by hawkish policymakers.

Australian markets have ratcheted up expectations of higher interest rates next year by 40 bps. This is even as the Reserve Bank insists it will keep policy super-easy out to 2024. Analysts says that the money market moves may heap pressure on central banks. This heightens the fear of falling behind the curve.

Marija Veitmane is a senior strategist at State Street Global Markets. He does not expect aggressive rate hiking cycles in any major economy. But acknowledged that given the conflicting economic cross-currents, central banks around the world are caught between the rock and the hard place right now.

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Investors caught off guard as Bank of Canada’s inflation indicator fails

BoC sets rates to two-decade peak with room for more

US markets’ slump deepens to a half-year peak; its consequences

US markets’ slump deepens to a half-year peak; its consequences

Dollar edges up as jolt from Fed minutes wanes

Dollar unflinchingly holds position amid uncharted numbers

Deutsche Bank snapped by Credit Suisse

Timeline until: Credit Suisse stumbled and UBS went to its aid

Relentless debt: US loans are dragging; root cause multiplies

Relentless debt: US loans are dragging; root cause multiplies

UK to slash bond issuance

Banks toss bets for high-jeopardy bonds

Global Business Review Magazine

Global Business Review is a online print magazine focusing on the updates and information about on emerging markets, Finance, Banking, Technology. Global Business Review provides news, features, analysis, commentary, and interviews from industry across the globe.

Recent News

  • BoC sets rates to two-decade peak with room for more
  • US markets’ slump deepens to a half-year peak; its consequences
  • Dollar unflinchingly holds position amid uncharted numbers
  • Timeline until: Credit Suisse stumbled and UBS went to its aid
  • Relentless debt: US loans are dragging; root cause multiplies

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