Traders continue to readjust expectations for how much higher interest rates may climb and put a 4% chance on an almost 6% fed-funds rate in five months.
Traders continue to readjust their expectations for how much higher U.S. interest rates could climb this year, and are now putting a very slim chance on an almost 6% fed-funds rate in five months. Though fed-funds futures reflect the overwhelming likelihood that rates will come in between ranges no higher than 5.75% by July, traders are pricing in a 4% chance that the fed-funds rate target could reach 5.75% to 6%. That’s compared with a 2% chance on Friday and zero chance last month.
As of Tuesday afternoon, all three major indexes SPX DJIA COMP were down, led by a 1.9% drop in the growth-heavy Nasdaq COMP , which had managed to keep rallying last week despite a trend of rising Treasury yields. Bonds aggressively sold off on Tuesday — sending the 1-year T-bill rate BX:TMUBMUSD01Y toward its highest level in 22 years, at around 5.05%, according to Tradeweb.Meanwhile, gold prices extended their slide and the ICE U.S.
The outside risk of a peak 6% fed-funds rate target has been around for almost a year, but investors and traders have hesitated to put much weight on it. The last time interest rates were that high was January 2001.
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