Traders Lose Faith In Fed - Shift Rate-Hike Bets To December

Tyler Durden's picture

While a June rate-hike is baked in the cake no matter how badly the economic data that The Fed is "dependent" upon collapses, it appears traders are losing faith in the rest of the year as the odds of a hike occuring in December is now above that of September (as both drop to around 25%).

As economic data has crashed since The Fed hiked rates in March, so the markets expectations has dropped to just 1.44 rate-hikes this year (one in June guaranteed), well below The Fed's guidance of 2 more rate-hikes minimum...


But perhaps more notable is the shift in timing as September odds tumble and December moves ahead...


And Eurodollar options traders are increasingly positioining for The Fed to disappoint...


But banks don't care.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Raffie's picture

Seems like a long ways till Dec till the Fed drops a deuce.

The Fed is going to be prairie doging it hard.

Art Van_Delay's picture

While the circus is in Washington, muslim lovers are cooking something under the radar North of the border.

Soon we might need two walls.

Lady and The Tramp: Trudeau and Obama’s Montreal Dinner Date

El Oregonian's picture

Boy, when the end hits it will be a quiet thud.... Because all the rats would have long scurried away.

slimycorporatedickhead's picture

QE4 Odds are currently 100%.. fed hasn't figured out how they can ease and tighten simutaneously

wisehiney's picture

Betcha they do not raise in June.

NAV's picture

After the 90th month of playing the ZIRP shell game, hasn’t it struck you yet that there is no pea, I mean fed funds rate increase, under the shells?  Don’t you know after these past 90 months that the game is fraudulent and that the Fed is chaired by nothing but confidence tricksters conning folks out of their hard earned money?.

Sure, Ben and Janet have allowed a few now-you-see-it-now-you-don’t wins of .25% to keep the scam going but it’s all sleight of hand perpetrated by swindlers. Bernanke must be amazed that the game has run so long.

Bernanke himself acknowledged the hit in a 2011 press conference: “We are quite aware that very low interest rates, particularly for a protracted period, do have costs for a lot of people. They have costs for savers. We have complaints from banks that their net interest margins are affected by low interest rates. Pension funds will be affected if low interest rates for a protracted period require them to make larger contributions. So we are aware of those concerns, and we take them very seriously. I think the response is, though, that there is a greater good here, which is the health and recovery of the U.S. economy.”

And just to prove there's a sucker born every minute, those tiny Fed hikes are not actually rate hikes at all, but the opposite. As Chris Martenson puts it: " In the past, when the Fed ‘hiked rates’ what it actually did was drain money from the system. Money out = interest rates up.

“Now when the Fed hikes rates it removes zero money in the system, and this is why a rate hike is not actually a rate hike at all, but the opposite because it leaves 100% of the money in the system but raises the amount that banks and other financial institutions can charge you for new loans and outstanding credit.”

That’s why,  after the Fed’s recent “hike,” the earned  interest rate on your new CD went down but the floating interest charged on your old equity loan went up.

Unfortunately, there are no federal game-show regulations to warn the people that the Fed's confidence game is illegal, a scam perpetrated upon the people by the U.S. Congress.

wisehiney's picture

I agree about the pea, but all of their games leave my back feeling like I slept on a brick!

I am sorta hoping that they are foolish enough to raise this month though.

Being long TLT and all.

Policy error = short rate raise = long rate fall.

NAV's picture

Heading toward "as von Mises warns and as history has shown again and again, [by] currency regimes burdened by too much debt...a critical failure point where an uncontrollable cascading collapse becomes inevitable." -- Chris Martenson, When Is a Rate Hike Not a Rate Hike?

wisehiney's picture

Antal Fekete was/is the best at explaining that.

Martenson plenty good also.

HRH Feant2's picture

So chances are good that I can get another refi loan with a generous lender credit and get my 30-year loan down to 2.25%? WOO HOO! Bring it on!

So far: bought house with 4.25%, refi'd down to 3.5%, refi'd in October down to 2.8% and my mortgage (PITI) is less than $1000 a month. If I can get a refi down to 2.25% and PITI down to $850 a month? That would be sweet!

Consuelo's picture




Mortgage -- derivation of 'La Morte' - or, 'payment until death'...  



HRH Feant2's picture

If you don't need one, goodie! Here's a gumdrop to suck on.

JailBanksters's picture

So you've agreed to repay money that doesn't even exist, until you make a payment. Sweet.

2_legs_bahhhhhd's picture

I hope you aren't taking investment advice from Susie Ormand.

When you refinance a mortgage you should be throwing down the maximum lump sum, and keeping your payments the same as before. This will knock years off your term. It doesn't matter what the interest rate you have, every dollar you pay those rats in interest, its a dollar you will never see again. Starve em out

Lost in translation's picture

< Fed raises this month

< Fed does not raise this month

CJgipper's picture

The odds of a real hike were always 0.  They're 0 for December too.

Overleveraged_and_Impatient's picture

The Fed can hike, or it can not. Doesn't matter. There is still $200+ Billion of newly created money at central banks all over the world that will be buying up tons of assets, including US Stocks. The President's Working Group on Financial Markets knows the deal, and is at the standby ready to intervene if anything goes wrong.

Folks, this is the most predictable market of all time. I am thinking 3000 S&P 500 by year end, and 4500 by Q1 2019.

wisehiney's picture

Bonus - if they raise Trump can blame the coming explosion on the fed.

alphasammae's picture

traders (hedge funds) lose faith in the FED so opted away from digital paper gold and silver manipulated FED trading and instead are going for BITCOIN the next financial bubble!

Russdiamon's picture

This guy I follow has been calling for a drop/top around this time for awhile now. That june rate hike could definitely play in to it. Though I'm just glad I have him to follow for timing the market. Has helped me out quite a bit in the past. I definitely recommend taking a look at what he has to say.

check this out