FED Will raise interest rates 50bp tomorrow?

[DarthTrader]

There's a lot of chatter that the FED will raise 75 basis points, this seems to be a fake-out, a bunch of institutions buying panic-selling retailers telling them the FED will raise 75bp instead of 50bp.

This is wrong based on the evidence:

Understanding Recent Changes in SOFR-Based Loan Index Rates

There has been a recent divergence between the  different variations of SOFR  used in commercial real estate (CRE) loans, with Term SOFR increasing while daily simple SOFR and New York Fed 30-Day Average SOFR remaining relatively flat prior to the Federal Reserve meeting and the other starting to…

www.chathamfinancial.com

Term 1mo SOFR rates estimate the SOFR Spot rate targeted by the FED. Example above is that the 1mo SOFR rates - ahead of the FED meeting, rose by 25bp from about 5bp to 35bp (overshooting the target a little). Then the FED raised the rates by 25bp and the SOFR Spot rate rose to 28bp or so.

Today the SOFR spot rate is the bottom of the FED funds target range, 75bp to 100bp. It's at 73bp now:

Secured Overnight Financing Rate Data - FEDERAL RESERVE BANK of NEW YORK

www.newyorkfed.org

The 1mo TERM SOFR rate is at 1.33bp right now, or just 60bp (a little overshoot for speculation) above the current rate. That is much closer to 50bp than 75bp:

https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html

Thus I think the FED will raise rates only by 50bp tomrrow.

Who do you think is right? A $300 Trillion (yes trillion) dollar derivatives market that trades $3.6trillion dollars a day in the REPO market?

Or some assclowns on CNBC?

You decide.

 

[Darkwind]

Let's hope they don't do what they did in 2000.

Has anyone ever "popped' their clutch on a low rpm engine? Did it stall on you?

The Feds did this in 1999 or 2000 and pretty much stalled the economy.

Right now, we are on the very edge of a recession.

 

[DarthTrader]

Let's hope they don't do what they did in 2000.

Has anyone ever "popped' their clutch on a low rpm engine? Did it stall on you?

The Feds did this in 1999 or 2000 and pretty much stalled the economy.

Right now, we are on the very edge of a recession.

Oh we're getting a recession, that's baked in. The problem is different - I think - that the FED are trying to manage a massive transition from LIBOR to SOFR based products during a massive bout of inflation.

The FED can't just jack rates too far too fast, or else USD-LIBOR rates get squeezed against SOFR rates and that's like passing a $300Trillion kidney stone through your urethra without jackhammering it first.

 

[HereWeGoAgain]

That'll do wonders for our bank stocks!!

 

[jwoodie]

There's a lot of chatter that the FED will raise 75 basis points, this seems to be a fake-out, a bunch of institutions buying panic-selling retailers telling them the FED will raise 75bp instead of 50bp.

I agree that this looks like a fake-out. The only thing I would add to your analysis is that EVERYTHING our government does now is politically driven. Any concerns about inflation are strictly limited to how it will affect the upcoming elections. Even more diabolically, this administration may intentionally create a crisis in order to declare a national emergency and place these elections under federal supervision. Only fools and demtards think that can't happen.

 

[DarthTrader]

Update. Term SOFR at 1.47%. Almost pricing in a 75bp hike. But it is an undershot, where as before its always over shot. So I see it as the SOFR not as confident on a hike of 75 still. But it'll be a close call this round. Maybe an indicator of fear more than reality.

 

[bugs]

There's a lot of chatter that the FED will raise 75 basis points, this seems to be a fake-out, a bunch of institutions buying panic-selling retailers telling them the FED will raise 75bp instead of 50bp.

This is wrong based on the evidence:

Understanding Recent Changes in SOFR-Based Loan Index Rates

There has been a recent divergence between the  different variations of SOFR  used in commercial real estate (CRE) loans, with Term SOFR increasing while daily simple SOFR and New York Fed 30-Day Average SOFR remaining relatively flat prior to the Federal Reserve meeting and the other starting to…

www.chathamfinancial.com

View attachment 657868

Term 1mo SOFR rates estimate the SOFR Spot rate targeted by the FED. Example above is that the 1mo SOFR rates - ahead of the FED meeting, rose by 25bp from about 5bp to 35bp (overshooting the target a little). Then the FED raised the rates by 25bp and the SOFR Spot rate rose to 28bp or so.

Today the SOFR spot rate is the bottom of the FED funds target range, 75bp to 100bp. It's at 73bp now:

Secured Overnight Financing Rate Data - FEDERAL RESERVE BANK of NEW YORK

www.newyorkfed.org

View attachment 657866

The 1mo TERM SOFR rate is at 1.33bp right now, or just 60bp (a little overshoot for speculation) above the current rate. That is much closer to 50bp than 75bp:

https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html

View attachment 657867


Thus I think the FED will raise rates only by 50bp tomrrow.

Who do you think is right? A $300 Trillion (yes trillion) dollar derivatives market that trades $3.6trillion dollars a day in the REPO market?

Or some assclowns on CNBC?

You decide.

They BETTER Do SOMETHING...

 

[Harpy Eagle]

They BETTER Do SOMETHING...

they sure did something

Fed raises interest rates by 75-basis points in historic move to fight inflation

The Federal Reserve on Wednesday approved the largest interest rate hike since 1994 as officials try to tame runaway inflation, which in May surged to another 40-year high.

www.foxbusiness.com

 

[Toddsterpatriot]

There's a lot of chatter that the FED will raise 75 basis points, this seems to be a fake-out, a bunch of institutions buying panic-selling retailers telling them the FED will raise 75bp instead of 50bp.

This is wrong based on the evidence:

Understanding Recent Changes in SOFR-Based Loan Index Rates

There has been a recent divergence between the  different variations of SOFR  used in commercial real estate (CRE) loans, with Term SOFR increasing while daily simple SOFR and New York Fed 30-Day Average SOFR remaining relatively flat prior to the Federal Reserve meeting and the other starting to…

www.chathamfinancial.com

View attachment 657868

Term 1mo SOFR rates estimate the SOFR Spot rate targeted by the FED. Example above is that the 1mo SOFR rates - ahead of the FED meeting, rose by 25bp from about 5bp to 35bp (overshooting the target a little). Then the FED raised the rates by 25bp and the SOFR Spot rate rose to 28bp or so.

Today the SOFR spot rate is the bottom of the FED funds target range, 75bp to 100bp. It's at 73bp now:

Secured Overnight Financing Rate Data - FEDERAL RESERVE BANK of NEW YORK

www.newyorkfed.org

View attachment 657866

The 1mo TERM SOFR rate is at 1.33bp right now, or just 60bp (a little overshoot for speculation) above the current rate. That is much closer to 50bp than 75bp:

https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html

View attachment 657867


Thus I think the FED will raise rates only by 50bp tomrrow.

Who do you think is right? A $300 Trillion (yes trillion) dollar derivatives market that trades $3.6trillion dollars a day in the REPO market?

Or some assclowns on CNBC?

You decide.

This is wrong based on the evidence:

DURR.