Lower on Fed funds at February meeting. Don’t see much movement on spreads, despite talk of a pivot, and the possibility of a soft landing.

(Click on image to enlarge)

Figure 1, Top Panel: Effective Fed funds (black), and CME FedWatch implied for February 1 meeting, as of 1/13/22 (tan square), 1/7/2023 (sky blue circle), 12/14/2022 (red triangle); Middle panel: Ten year – three month spread (blue), ten year – two year spread (red); Bottom panel: five year Treasury – TIPS spread (green), spread adjusted for risk and liqudity premia (sky blue). Source: Fed, Treasury via FRED, and  KWW following D’amico, Kim and Wei (DKW) accessed 1/14, CME FedWatch accessed 1/14, and author’s calculations.

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