Fed funds commentary: futures still slightly higher
Fed funds futures are slightly higher, but off their best levels after the employment numbers. The market continues to show no action on rates from the FOMC over the near term given the renewed instability in the financial markets and the subpar economic data. Indeed, most Fedwatchers doubt there will be any action from the FOMC ahead of the November elections. The Aug implied rate is trading at 2.04%. The Nov implied rate is at 2.15%, suggesting about a 60% chance for a 25 bp tightening by the end of November. Jan is trading at 2.22%. The market had a much more bearish tint two months ago, before the GSE crisis, and the market had priced in 75 bps in tightening by year end.