Pre-FOMC Market Update
Fed Fund futures are slightly lower and currently show an implied rate of 2.06% which shows a 76% chance of a 25 bps cut this afternoon. Fed Fund Binary Options at yesterday’s settlement showed a 96% chance of a cut to 2% this afternoon. Fed Fund options show a 71% chance of a 25 bps cut and a 24.5% chance the Fed will leave rates unchanged.
Bonds are nearly unchanged save for some buying into the 30yr which is up 0.2% with a yield of 4.531%. The 10yr is yielding 3.812%, the 5yr yield is 3.118% and the 2yr is yielding 2.375%. The short end of the curve is catching a decent bid with the 4week bill yield down 7 bps to 1.2%, the 3month bill yield down 4 bps to 1.42% and the 6month bill yield down 2 bps to 1.71%.
USD is mixed ahead of this afternoon’s rate announcement with EUR/USD flat at 1.5567, Cable up 0.72% to 1.9838 and USD/JPY up 0.33% to 104.38.