Fed funds futures have continued to rally
Fed funds futures have continued to rally in the wake of the dovish FOMC minutes, the comments from Fed officials, none of whom have sounded as though they are ready to turn toward a more aggressive rate hike stance, and risk-off trading conditions. The big push higher was evidenced after the FOMC minutes yesterday which indicated the Fed discussed a potential "small technical adjustment to IOER," suggesting it may set the rate 5 bps below the top of the Fed funds target range. The EFFR has been set at 1.70% all month, and is just off of the 1.75% upper band. The markets are viewing this indication from the FOMC as a defacto 5 bp rate cut as the Fed looks to establish a floor. Implied rates are still pricing in a 25 bp June tightening, and another in September, but the chances of a December move, which would be the fourth this year, have eroded to about 30% now.