TD Securities calls July rate hike pricing excessive, citing weak CPI/PPI data and Fed caution on forward guidance.
Market pricing for a Federal Reserve rate hike in July has surged to 8 basis points from just 2bp days ago, driven by higher oil prices and US-Iran tensions. TD Securities analysts argue this pricing is excessive, deeming a July move unlikely despite risks of hikes later in 2026.
Recent weaker-than-expected CPI and PPI readings temporarily eased concerns about energy pass-through to core inflation. However, persistent energy shocks could reignite fears of Fed intervention. The deviation between market pricing and Fed action would rank as the second-largest in the past decade if current expectations persist.
Ten-year Treasury yields remain range-bound between 4.66-4.69%, with key resistance levels at 4.80% and 5.00%. Fed policy and growth expectations continue to drive yields, though no immediate breakout is observed.