The Fed’s Window Is Closing

I’m watching Jay Powell testify before Congress on his nomination for Fed chair. It appears to be smooth sailing.

Speaking of which, here’s another version of a chart I often discuss. This shows the two components of the 2/10 spread. It’s the two-year and ten-year Treasury on the same scale. Notice how quickly they’re converging.

According to the futures market, there’s a 92.8% chance the Fed will raise rates in two weeks. The only dissenting forecast calls for two rate hikes.

The futures market sees another hike in coming in March, although that view is at 50.1%. A hike by June is at 74.8%.

The odds are just slightly against a third hike by November. That means there’s a chance that the 2/10 could invert before the end of 2018.

Posted by on November 28th, 2017 at 11:27 am

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