Fed Funds
The Nov. Fed Funds future has priced in a 75 BPS cut. 100- 95.42 = 4.50 % implied Fed Fund Rate by Nov. I'm making a bold prediction but here goes:
NO FED CUT IN SEPT.
If you listen to the political cronies, they downplay the employment number as an outlier and the economy is still strong. The credit market will work itself out, blah, blah, blah. If this is the case, then the Fed shouldn't have to cut at all. In any case I think anything over 25 BPS would set off a panic in the world markets, last thing the Fed wants. There are 2 fed meetings till November expiry so this does add to the risk. I think I'll get a lot more information regarding the strength of the market from earnings reports and adjust accordingly.
EDIT
Bernanke decided to cut 50 BPS on the Fed Fund rate causing me massive pain and humiliation. It reminds you that the market CAN and IS illogical many times. By now you know the arguments, what does he see that so bad? What happens if 50 BPS isn't enough, what if 525 BPS isn't enough?? Anyway, my only advice is not to fight the tape even though it smells....
As per the ChiBondKing, nice call on the cut.
The Nov. Fed Funds future has priced in a 75 BPS cut. 100- 95.42 = 4.50 % implied Fed Fund Rate by Nov. I'm making a bold prediction but here goes:
NO FED CUT IN SEPT.
If you listen to the political cronies, they downplay the employment number as an outlier and the economy is still strong. The credit market will work itself out, blah, blah, blah. If this is the case, then the Fed shouldn't have to cut at all. In any case I think anything over 25 BPS would set off a panic in the world markets, last thing the Fed wants. There are 2 fed meetings till November expiry so this does add to the risk. I think I'll get a lot more information regarding the strength of the market from earnings reports and adjust accordingly.
EDIT
Bernanke decided to cut 50 BPS on the Fed Fund rate causing me massive pain and humiliation. It reminds you that the market CAN and IS illogical many times. By now you know the arguments, what does he see that so bad? What happens if 50 BPS isn't enough, what if 525 BPS isn't enough?? Anyway, my only advice is not to fight the tape even though it smells....
As per the ChiBondKing, nice call on the cut.
posted by market operator at 1:19 PM
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