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Strategies & Market Trends : Ask DrBob

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To: longdong_63 who wrote (45739)10/10/2001 6:07:57 PM
From: longdong_63  Read Replies (1) of 100058
 
9:40 AM
FED TALK: Fed easing expectations remain little changed, with the market continuing to price in roughly a 100% chance of a 25 basis point rate cut on Nov. 6. The November contract is currently pricing in a rate of 2.265%, down from 2.275% at Tuesday's close, a life-of-contract low. A 25 basis point cut is fully priced into the November contract at 2.30% so the current rate suggests the market is fully priced for a quarter-point cut in November. Tuesday marked the first day since the Fed cut rates on Oct. 2 that the effective Fed Funds rate didn't fall below the 2.50% target. But the market still needs to account for that possibility. So even though rates priced into the November contract have been declining slowly but steadily, we don't feel the contract is yet pricing in a meaningful probability of a 50 basis point cut in November. But the market continues to price in about a 50/50 chance of another cut after the November meeting, either at the December 11 meeting or the January 29/30 meeting. The December contract is trading at 2.15%, near the midpoint of the range that would price in no move (2.25% assuming a 25 basis point cut in November) and a 25 basis point cut (2.09% assuming a 25 basis point cut in November).
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