Rates as of 0500 GMT

Market Recap

The selloff continues. Fridays shocking US consumer price index CPI is still reverberating through the markets.

Some Wall Street economists were updating their calls for Fridays meeting of the Federal Open Market Committee FOMC, the ratesetting body of the US central bank. The consensus has been that they will hike 50 bps, as numerous Fed officials have said, but some economists revised their forecast to a 75 bps hike and a few were even considering whether the Fed may need to hike 100 bps. Against that background, a lateintheday headline from the Wall Street Journals Fed reporter suggesting that the Fed would consider hiking 75 bps was the last straw for the markets.

The market interpreted consider to mean carry out.

And increased their estimate of the terminal rate the highest rate that the Fed would hike to by 32 bps, or one rate hike and a chance of another. Its now about 4.0, well over the Feds estimate of the neutral rate the rate at which monetary policy is neither a boost nor a drag on the economy of 2.4.

Stocks plummeted globally

while bond yields rose, especially at the short end of the yield curve as markets discounted more central bank tightening. US twoyear yields have risen 31 bps so far this week, while German yields are up 18 bps.

In this atmosphere, the safehaven JPY recovered somewhat, aided by comments from Japanese officials hinting that they might intervene in the market. However, intervention…