Black Every Day?
- Thread starter nitro
- Start date
Using Quadl data you can analyse how often the FED has surprised the market based on what the front FFFs contract are saying. Ready? Zero times in the twenty some odd years has the FED gone against what the FFs have predicted.
https://www.quandl.com/collections/futures/cme-30-day-fed-funds-futures
I have a theory that all the talk is on purpose to create a discovery feedback loop to see just how reluctant the market is to a rate hike. So the FED players aren't talking to force an issue - it is more like taking a measurement of the FFFs to their talk. Like asking permission. So 30% probability is actually 0%. It is binary with a threshold of something like 75% is green light. The FED is the markets' bitch.
Wake me up when December comes.
https://www.quandl.com/collections/futures/cme-30-day-fed-funds-futures
I have a theory that all the talk is on purpose to create a discovery feedback loop to see just how reluctant the market is to a rate hike. So the FED players aren't talking to force an issue - it is more like taking a measurement of the FFFs to their talk. Like asking permission. So 30% probability is actually 0%. It is binary with a threshold of something like 75% is green light. The FED is the markets' bitch.
Wake me up when December comes.
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Wow really? So if they raise next month it would be the first in 20 years?
Assuming the probability stays at 30% - yep. I don't see how the data between now and then can change the probability by another ~45%.
Re-read the post. I added some theory. What is hilarious is the FX market believes this crap over and over again.
What about the surprise rate cut on 1/3/2001?
Or on 1/22/2008? Come on, no one knew that.
Show me the FFFs front month contract the day prior to the "surprise" days. Scroll down to the Quandl link I gave to "All Individual Contracts" and then post here the letter code or just the link to the chart. e.g.,
https://www.quandl.com/data/CME/FFH2001-Federal-Funds-Futures-March-2001-FFH2001-CBOT
I see that on 1/3/2001 the contract was 94.1, and 1/4/2001 was 94.5.
The rate was 6.5%, then on 1/3/2001 13:15EST, a surprise announcement to 6%.
Huh? Didn't you just prove it was not a surprise? Anything above 75% is 100%
I am ignorant. How do you calculate the percentage? If the price is 94.1, does it mean the rate is 5.9%?
The current price is 99.56%, and the target rate is 0.25-0.5%. Therefore, it is predicting no cut, but no raise too. I guess that much I know, but I don't see how to assign probabilities unless I know the distribution (and volatility).