Coincident with the pullback in most markets over the past few weeks on doubts with the robustness of the 2nd half global economic recovery, the fed funds futures have been pricing in lowered odds of a fed rate hike by year end. Odds of a 25 bps hike to .50% by December is near 20% today, down from 44% one week ago and 100% one month ago.
While yesterday's US stock market close was poor, Asia and Europe didn't follow today as debt in Greece, Spain, Portugal, etc... rallied, their CDS narrowed and stocks bounced. The Greek finance minister said January tax revenues came in above expectations and that spending was below target for the month and said "that means the deficit reduction for January is well within what we have promised." The euro is rising in turn. Also helping is the story that Trichet is headed to the European Union leaders summit a day early in order to address Greece's problems even as the Greek finance...
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July 8th, 2009 at 4:50 pm
The Fed will be led by the markets as usual and eventually hike only after the bond market has already adjusted.