“US Fed Traders Fully Price in Another Rate Hike for June or July Meeting”

In the interest rate swap market on the 25th, the view that the US Federal Open Market Committee (FOMC) will decide to raise the interest rate by 0.25 points at the two meetings until July is fully priced. There is also a more than 50% chance of a similar rate hike in June.

Yields rose on the day, led by short-term bonds, on growing optimism that debt ceiling talks would be finalized and economic data. With such a move as a clue, the degree of pricing for rate hikes has changed.

In the first week of May, when the FOMC decided to raise rates, it was almost entirely priced in that there would be no more rate hikes this year and up to three rate cuts by the end of the year.

The swap interest rate linked to the July meeting rose to 5.34% on the 25th. That’s more than 25 basis points above the current effective Federal Funds (FF) rate of 5.08%. With the FOMC tending to move in 25 basis point ranges, the market expects a similar rate hike at its July or June meeting. Swap rates tied to the June meeting priced in about 14 basis points, suggesting the Fed sees a more than 50% chance of a 25 basis point hike at the meeting.

news-rsf-original-reference paywall">Original title:Fed Traders Are Fully Pricing In Another Rate Hike Once Again(excerpt)