Monday, October 6, 2008

Will Fed Lower Rates? Technicals of Fed Fund Futures Chart, Options & Curve

There's talk on the street that the U.S. will cut the Fed Funds rate, possibly coordinating with other foreign central banks. Here are quotes from the Bloomberg article: Treasury 2-Year Gains Unstoppable as Fed May Cut Rate (Update2), plus a CNBC video with Diane Swonk @ Mesirow Financial.

``My biggest concern has been and continues to be that the real economy is going into the doldrums,'' said Thomas Girard, a money manager who helps oversee $110 billion in fixed income assets at New York Life Investment Management in New York. ``That ultimately leads the Federal Reserve to lower rates, maybe over the next six months by 100 basis points, and if that is the case Treasury yields will decline.''

"Goldman Sachs economists predicted on Oct. 3 the Fed may lower its target by 1 percentage point in coming months. The firm previously expected policy makers to keep rates unchanged."

Here are charts from that show the Fed Fund Futures Chart, Options and Curve. It should be noted that the Call/Put Premium Ratio is 63.50..

Fed Fund Futures Chart Trend (Source:

Fed Fund Futures Option Chain (Source:

Fed Fund Futures Curve (Source:

CNBC Video w/ Diane Swonk of Mesirow Financial

Video re-directs to


Joseph Wechter said...

I know they will do anything they can not to lower rates. Could the rally at the end of today be buying ahead of the fed meeting? I think so.

Distressed Volatility said...

Australia cuts interest rate 1 percentage point

"Australia's central bank cut its official interest rate by a bigger-than-expected 1 percentage point Tuesday to ease credit concerns amid a global financial turmoil, cheering investors around the region."


Analysts back coordinated rate cut

With no let-up in market turmoil in sight, analysts say a coordinated interest rate cut by the European Central Bank, the Bank of England and the U.S. Federal Reserve is becoming more and more likely as a way to help revive lending between the world's banks.

-International Herald Tribune