Excerpt from: Bonds and Interest Rates CFDs and Spread Bets
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| March 12, 2007 | | Interest rate futures call for rate cuts later this year | Interest rate futures are showing that speculators expect U.S. interest rates to drop later this year. While U.S. rates are expected to remain the same at the next two meetings of the Federal Reserve, many are expecting the economy to slow and interest rates to fall by mid year. Spread betting and contracts for differences on U.S. interest rates may find the following from Bloomberg helpful:
Traders added to bets the Federal Reserve will reduce its
target for the overnight lending rate between banks from 5.25
percent by mid-year as economic growth slows.
Interest-rate futures suggest there is a 38 percent chance
the Fed will cut rates by 25 basis points at its June meeting, up
from 32 percent odds on March 9.
The futures priced in almost no chance of a rate cut at
either of the Fed's next two meetings on March 21 and May 9.
``The bottom line is that this is something that is going to
impact the economy going forward,'' said Thomas Tucci, head of
U.S. government bond trading in New York at RBC Capital Markets,
the investment-banking arm of Canada's biggest lender. ``The
market is taking heed of some of these other things and starting
to build in an easing potential.'' | | |
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