Following a week of mediocre economic data, a mixed response so far to earnings season and more steps by China to tame inflation pressures and slow the pace of their extraordinary lending program, the July fed funds futures, which capture the June meeting, are today trading below 25 bps (top end of the Fed’s current fed funds target range), for the first time. There is also no longer a 100% chance of a fed hike by the Sept meeting where Tuesday had priced one in. Today those odds are down to 30%. It is not until the Nov meeting now that the market has fully priced in a 25 bps rate hike. Easy for longer remains the bet on the part of the market.
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