IGA Capital Weekly Market Update

Date: June 2, 2025

Fed Funds Futures & Policy Outlook

Markets are increasingly pricing in multiple rate cuts across the upcoming FOMC meetings. The implied Fed Funds rate drops from 4.32% in June to 3.68% by January 2026, reflecting expectations of six rate cuts totaling 65 basis points. The most likely cut is in December, with a 70.4% probability.

The Fed's Dot Plot median for year-end 2025 remains 3.875%, suggesting the Fed may take a more patient approach than markets expect.

10-Year Treasury Outlook

The 10-year UST yield stands at 4.44%, up 13 bps from May. Consensus forecasts project a moderate decline, with the Q4 2025 estimate at 4.25%, while implied forward yields suggest higher levels around 4.47%, indicating a potential divergence between analyst expectations and market pricing.

Forward Curves Insight

SOFR forward curves show a gentle downward slope, with 1M SOFR expected to fall from 4.32% today to 3.40% in 1 year. Treasury forwards follow suit, though longer-term yields (5Y, 10Y) remain anchored above 4.5%, implying sustained inflation or growth concerns.

REITs posted mixed results. Mortgage REITs show high double-digit dividend yields (e.g., AGNC at 16.1%, Arbor Realty at 16.6%) but carry elevated leverage. Multifamily and Healthcare REITs remain stable, with average yields between 3–5%, and valuations firming as rate clarity improves.

Economic Dashboard

• Fed Funds Rate (EFFR): 4.33%

• S&P 500: Up 4.7% MoM, now at 5,912

• Gold: Soars to $3,344/oz, a 69% YoY increase

• Oil: Rebounds to $62.85, still down 13.3% YoY

• Nasdaq: Up 7% MoM, leading equity performance

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