CME FedWatch Tool Shows Probability for 2017 Rate Hikes

With the CME FedWatch tool currently projecting a probability of nearly 96% for a rate hike at the June 14 meeting, the market is focused on the potential path of additional hikes throughout 2017.

Probabilities of Target Ranges for 2017 Fed Meetings

 

75 to 100 bps

100 to 125 bps

125 to 150 bps

150 to 175 bps

6/14

4.2%

95.8%

0.0%

 

7/26

4.0%

91.2%

4.8%

0.0%

9/20

3.4%

77.0%

18.9%

0.8%

11/1

3.2%

74.0%

21.2%

1.5%

12/13

2.2%

52.1%

37.6%

7.6%

Probabilities as of June 6, 11:00 am CT

View 2017 Rate Hike Probabilities


Trade the June Fed Meeting with Wednesday Options

Take advantage of the first Wednesday Weekly Treasury option expiration on June 14 to express your view on the June 14 FOMC meeting.

When the Fed raised rates on March 15, 367K Friday Weekly Treasury options traded, +162% versus the 2017 average.

Learn About Wednesday Weekly Options


78% of Treasury Options Traded Electronically

  • 525K Treasury options traded daily on CME Globex in May, +56% YoY
  • 462K Eurodollar options traded daily on CME Globex, accounting for a record 34% of ED options volume

Read Our Options Update


Ultra 10 OI Reaches a New Record

  • Record OI of over 393K contracts on May 25
  • May ADV of 125K, the second best month yet
  • Ultra 10 futures block fee reduced beginning July 1

Product Details


Data through May 31, 2017 unless otherwise specified.

U.S. Rate Outlook

Blu Putnam, Chief Economist

With the unemployment rate at 4.3%, even with sluggish labor force growth and wage growth barely staying ahead of inflation, the Fed remains on track for several more rate rises in 2017.

The Fed now also appears ready to start a long and drawn-out process to reduce the size of its balance sheet. A bloated balance sheet is inconsistent with raising rates, but fears of possible market impacts have made the Fed very cautious.

The Fed currently holds $2.5 trillion of U.S. Treasury securities and $1.8 trillion in mortgage-backed securities (MBS). The reinvestment activity implies the Fed is currently a buyer of about $1 of every $2 of new Treasury debt and also remains a huge player in the mortgage market.

We anticipate the Fed will stop reinvesting 100% of the principal and interest received from these investments, and switch to a staged policy of putting a cap on reinvestment activity. The cap would be adjusted periodically over the next few years until reinvestment activity was completely halted.

Because the Fed anchors the short-end of the yield curve with its target federal funds rate policy and the interest it pays on excess reserves, the market impact of maturing Treasury securities not being reinvested will probably be very small, although it does imply less buying by the Fed at Treasury auctions. If the Fed also steps back from reinvesting in the MBS market, the impact might be a little larger, in the range of 0.25% to 0.50% in terms of possible mortgage rate increases along the maturity curve.

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