What Does the Futures Market Expect and When Does it Expect it?

As readers of my blog know, I’m a big fan of Bespoke Investment Group. They always have great research and info. Lately, Bespoke has been running a “Countdown to Liftoff” chart. This is based on Fed Funds futures and it shows how much time the futures market thinks there is between now and the first Fed rate hike.

I suggested slightly altering the chart to show the y-axis as a date. Bespoke was good enough to pass along their data, so here’s what the chart looks like.


This chart may look a bit off at first because both axes are dates, but bear with me. The x-axis shows the date. The y-axis indicates when people thought the first rate hike was coming.

Starting in the fourth quarter of 2013, the market was expecting the first rate hike by mid-2015. In March 2014, Yellen sent the market into a tizzy with her “something on the order of six months” remark, referring to the period between the end of QE and the first rate increase.

That remained the case all the way through September of last year when August 2015 was seen as I-Day. Lately, however, the first rate hike expectation is beginning to drift back. The market currently sees a rate hike in November 2015. After today’s Fed news, I think we’re soon going to see the futures market point to 2016.

Posted by on January 28th, 2015 at 2:55 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.