..confidence in an aggressive hike path. Fed funds rate futures have other ideas meanwhile.. Good morning!
The rates and market usually trend up and down with each other. Now with rates being so low for so long, the market needs to come down to meet the rates. How long far down will it go to reach the rates? Hard to say.
In the past fed rates have gone up to pace the market. Now they're rising to meet the falling market. Where will the market meet the fed?
..are moving towards seven hikes again. Traders will be disappointed if they bet on support from the monetary authorities.
..a 50 basis points in March. This is one of the main reasons the equities have found some support and are drifting higher. According to the CME Fed watch tool, there is only a 12.4% probability, that the Fed will hike by 50 basis points. The chart depicts the inverted April federal fund rate future contract.
..future markets try to slowly price in a 50 bps for March again, which seems odd. Is the situation in Eastern Europe overhyped, or is the inflation threat "underhyped". Why do futures sense the Fed is about to open a "second front", when uncertainty is running very high already?
Economists are forecasting anything from 3 to 7 hikes in 2022 while the Fed funds futures market appear to be pricing in at least 5 rate hikes in 2022, starting with the first, a 25bp hike, at the March FOMC meeting. The Fed's current target range is 0 to 0.25%. March futures (ZQH2022) imply a rate of 0.23 suggesting that the lower target rate will be raised...
I want to point out, that the federal fund rate futures, which measure the probability of a fed hike - in the above case via the December contract - seemingly are not buying the JPM whisper of a below expectation CPI figure. Something to consider.
Today's NFP print was an astronomical miss (3 sigma), which is just another reminder that economic models/risk models are breaking across the board as they can no longer explain reality. Everybody seems confused about how to interpret what is going on in the labor market, but the main takeaway, as expressed through above charts is, that the Fed will hike even...
Markets starting to price in five 25 bps hikes for the year.
This charts reflects how well priced in (not) the futures market were regarding a determined Fed. Powell didn't even bother to put the 50 bps hike off the table. The implied probability for the fed funds rate in April is at 0.38%, that means we are now closer to 50 bps than to 25 bps.
..are not coming to the rescue today. Something to consider. Explainer: The above chart maps the Federal Fund Rate future contract for April. To convert the contract to the implied yield level we need to subtract from 100.
Federal Fund Rate Futures (inverted) coming back amidst a very strong 2Y auction (High yield 0.990%, When-Issued 1.002%). A rate hike in march is still a sure thing.
Over the last couples days the idea of a 50 bps makes is slowly seeping into the market's consciousness. Today's commentary is coming from Ackman and Bloomberg. Is this for real? Future markets keep pushing higher, but the implied fed funds rates are thankfully still a far cry from 50 basis points. Still though, the fact that this is even very remotely...
The implied fed funds rate for December came back 6 basis points today and is telegraphing a fed funds rate of about 0.88 bps, which is suggesting 3 hikes. 1.5 bps of that compression happened in the after markets and I wonder if it was Gundlach that spooked markets with his call for a recession. Yes, in the big scheme of things (+65 bps since September) a drop...