There will be no Fed rate cut

[dhpar]

Quote from Dr.Greenback:

Seriously, do you guys even know who's the biggest players in the Fed Funds Futures Market are? I'll give you a hint; IT"S The FED!

to be honest I was always a little bit suspicious about this. If they walk the walk then they should not influence fed funds futures market. But do they walk the walk?

Recently I am a bit nervous that Fed is really there. Today's action in fed fund futures did not make any sense whatsoever. All futures were down except of October which was bid up with about 4,000 contracts around 95.19. This could be possible only if somebody knows the result of the next meeting or if Fed wants to manipulate expectation to 50bps cut.
I am slowly losing any faith in Fed doing the right things - if this is true then meeting is just a comedy with al decisions taken upfront and people in the know packing their wallets. And I am usually not a conspiracy guy.

Any comments appreciated.

 

[Pa(b)st Prime]

Quote from dhpar:

to be honest I was always a little bit suspicious about this. If they walk the walk then they should not influence fed funds futures market. But do they walk the walk?

Recently I am a bit nervous that Fed is really there. Today's action in fed fund futures did not make any sense whatsoever. All futures were down except of October which was bid up with about 4,000 contracts around 95.19. This could be possible only if somebody knows the result of the next meeting or if Fed wants to manipulate expectation to 50bps cut.
I am slowly losing any faith in Fed doing the right things - if this is true then meeting is just a comedy with al decisions taken upfront and people in the know packing their wallets. And I am usually not a conspiracy guy.

Any comments appreciated.

The most workable market consensus is 25 Tuesday with a 75% chance of another 25 next month. Plus you must be aware that the Fed Funds futures contract settles at the monthly average of each daily Fed settlement. Thus if the Fed moves to 5% Tuesday but allows Funds to drift down to a de facto 4.75, even without another official target change the futures will settle closer to 4.75 than 5%.

 

[plodder]

A little history is in order.
There have been time in the past that fed funds futures have indicated a rate decrease, yet it didn\'t happen.

 

[Pa(b)st Prime]

Quote from plodder:

A little history is in order.
There have been time in the past that fed funds futures have indicated a rate decrease, yet it didn\'t happen.

Look at a chart of Oct Funds. They've moved back and forth a since late last year a 100bp's at a clip in readjustments. This .25 is done. I'm quite hesitant to assume more are on the way.....

 

[dhpar]

Quote from Pa(b)st Prime:

The most workable market consensus is 25 Tuesday with a 75% chance of another 25 next month. Plus you must be aware that the Fed Funds futures contract settles at the monthly average of each daily Fed settlement. Thus if the Fed moves to 5% Tuesday but allows Funds to drift down to a de facto 4.75, even without another official target change the futures will settle closer to 4.75 than 5%.

cheers. of course i am aware of that - I trade this for years. But today's action in market depth must make you paranoid.
My point was that if odds of cumulative cutting go down across the whole curve then why somebody puts 4,000 contract bid at 95.185 (and trades many more '000s at that level).

By the way the implied concensus is now rounded 50bps (or should I say 40bps). So approx. 80% 50bps and 20% 25bps.

 

[Bob Rowshan]

Quote from Pa(b)st Prime:

Look at a chart of Oct Funds. They've moved back and forth a since late last year a 100bp's at a clip in readjustments. This .25 is done. I'm quite hesitant to assume more are on the way.....

So why is the poll so close? Ignorance? False hope?

 

[dhpar]

Quote from plodder:

A little history is in order.
There have been time in the past that fed funds futures have indicated a rate decrease, yet it didn\'t happen.

yes it is in order.
in the past few years it never happened that ff futures implied something different 1 week before the meeting than what actually happened.

 

[plodder]

Quote from dhpar:

yes it is in order.
in the past few years it never happened that ff futures implied something different 1 week before the meeting than what actually happened.

We are doomed, then, if Fed capitulates to people trapped long when market is down so little.

 

[Pa(b)st Prime]

Quote from Bob Rowshan:

So why is the poll so close? Ignorance? False hope?

Mostly ignorance.

Me and dhpar are the biggest Treasury bears on ET but we know by Fed open market operations what their next move will be. So does everyone else, that's why nearby futures have seen little volatility in recent days. It's in the cards.

.50 is a guess though and last Friday when March/08 was forecasting more than 100 by spring, a complete freakin' joke.

 

[dtrader98]

I've implied this on another thread. But, my belief is a new cycle of rate cuts is beginning. And about the only thing I can add to that is rate cuts don't always stop a raging waterfall. The last recession showed us how futile that approach was.