Tuesday, October 11, 2016

Whipsaw Week For Fed Funds Futures

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*The Fed Funds Futures are saying there will be a hike in December.
*Fed officials are stepping back from such a hike of late.
*First though we have the FOMC minutes on Wednesday which will confirm a hike then we have Fed Chair Yellen's speech which should water expectations back down.

The Fed Funds futures are expecting a 63% chance for a rate hike in December. Market participants say a rate hike is on. Fed Chair Yellen said she expected a hike but she's known to change her mind. Friday's speech could reset December's rate hike expectations back down. Before that though Wednesday's FOMC minutes should confirm a hike. It should be a whipsaw week for the Fed Funds Futures.
Let's look at the Fed Funds Futures.
Source: CME Group
The above chart shows that Futures traders expect the Fed Funds rates to be .5% by December. The Future is calculated 100 - the expected rate. 99.50 is an expectation of a .50% Fed Funds Rate in December.
Currently Fed Funds are transacting at about .40%.
The lift shown in this chart is calculated to be a 63% chance for a hike by theCME Countdown tables.
That means a rate hike is on for December.
Not only is a rate hike on but it is priced into markets in some way.
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