Fed funds futures are in rally mode with Treasuries
Fed funds futures are in rally mode with Treasuries. Deferred contracts are outperforming as the market prices in more Fed rate cuts down the road. The September contract remains fully priced, and then some, for another quarter point easing at the September 17, 18 FOMC. The implied rate on October stands at 1.80%, reflecting 32.5 bps of cuts; remember there is a policy meeting on October 29, 30 too. The January 2020 contract is at 1.48%, suggesting some 64.5 bps in rate reductions by the first meeting next year on January 28, 29. Analysts're forecasting a 25 bp easing in September. Meanwhile, the 2- and 10-year Treasury yields have fallen to 1.60% and 1.693%, respectively, well below the 2.125% midpoint of the current 2% to 2.25% target band.