The market is having a quick re-think on the probability of rate cuts both in the near and longer-term.
Earlier this month, cuts in October and December were fully priced in but that is now rapidly shifting. The October probability is still high but it's no longer a layup as it prices at 80%.
December is more-intriguing as it's right at 50/50.
There are even bigger moves further out with the Fed funds curve with next Sept pricing in 92 bps in easing compared to 104 bps a few days ago. You can see these shifts coming through the two-year yield, which is now higher on the month.
