Are Rates Coming Down? Fed Rate Cut In Three Days?

Summary

This week's update video discusses the possibility of a Federal Reserve rate cut, with most community members and market participants expecting no change in rates at the upcoming FOMC meeting. The video also covers a comparison of treasury yields from the past week and the beginning of the year, showing a decrease in shorter maturities and an increase in longer-term bonds. Lastly, it provides insights into the upcoming treasury auction schedule and highlights the highest-yielding new issue agencies, corporates, and broker CDs.

Takeaways

• 📉 The community is discussing whether the FED will cut rates at the upcoming FOMC meeting.
• 🗳️ A recent poll shows a small group expects a rate cut this week; most anticipate cuts in September or later.
• 📊 The CME FedWatch Tool indicates 95% of market participants expect rates to remain unchanged this week.
• 📅 The next FED meeting after this week is on September 18, with 88% expecting a 25 basis point cut then.
• 🌎 The CME (Chicago Mercantile Exchange) is the world's largest futures exchange, affecting rate predictions.
• 🔄 The probabilities of rate changes are based on 30-day Fed funds futures prices and can change regularly.
• 🇺🇸 Despite lower inflation, the recent US GDP report shows strong economic growth, suggesting no immediate rate cuts.
• 📈 Treasury yields mostly fell last week, except for the one-month T-bill and 30-year T-bond.
• 📉 Comparing current yields to the beginning of the year, shorter maturities are slightly down, but longer ones are up.
• 📅 The upcoming Treasury auction schedule shows regular T-bill and CNB auctions, with quiet medium and long-term Treasury auctions.

Q & A

Is a Federal Reserve rate cut expected at this week's FOMC meeting?

According to the script, a rate cut from the Federal Reserve is not expected at this week's FOMC meeting. The majority of market participants, as indicated by the CME Group's Fed Watch tool, are expecting the Fed to keep rates as they are.

What does the CME Group's Fed Watch tool indicate about the market's expectation for the next Fed meeting?

The CME Group's Fed Watch tool shows that 95% of market participants expect the Fed to maintain the current rates at the next FOMC meeting, with only a small minority, 52%, expecting a 25 basis point rate cut.

What is the significance of the Chicago Mercantile Exchange (CME) in the context of the Fed Watch tool?

The CME is the world's largest futures exchange, serving as a marketplace where interested parties can make educated guesses or bets on the future price of various commodities, including interest rates, which are reflected in the Fed Watch tool.

What was the latest U.S. GDP report's figure for the second quarter of 2024, and how does it relate to market expectations?

The latest U.S. GDP report showed a real GDP increase of 2.8% at an annual rate in the second quarter of 2024, which is higher than the market expectation of around 2%, suggesting that the economy is still strong and may influence the Fed's decision on interest rates.

How have treasury yields changed in the past week according to the script?

Treasury yields on nearly all maturities were down in the past week due to cooling inflation and ongoing political uncertainty, with the exception of the one-month T-bill, which increased by one basis point, and the 30-year T-bond, which remained unchanged.

What is the general trend of treasury yields compared to the beginning of the year?

Compared to the beginning of the year, all shorter-dated maturities have slightly decreased, but maturities of 2 years and above are still up, with longer terms showing a larger increase.

Where can one find more details on treasury rates for any day the bond market is open?

More details on treasury rates for any day the bond market is open can be found on the Treasury's Daily Treasury Par Yield Curve Rates page, which is linked in the first pin comment of the video.

What is the current state of the upcoming treasury auction schedule?

The upcoming treasury auction schedule is relatively quiet for medium and longer-dated treasuries, with all weekly T-bill and CNB auctions happening as usual, according to the Treasury Direct's Upcoming Auctions page.

Where can viewers find information on the highest yielding new issue agency bonds, corporate bonds, and broker CDs?

Viewers can find information on the highest yielding new issue agency bonds on Fidelity's platform, corporate bonds, and broker CDs as mentioned in the script, with specific details linked in the first pin comment of the video.

What resources are available for those interested in learning more about bonds and fixed income investments?

For those interested in learning more about bonds and fixed income investments, the script mentions the 2024 Bond Courses and the possibility of joining a Live Member Q&A session in August for further discussions.