Suddenly Chance Of 50 Basis Point Miracle Cut Skyrockets To 59%
Fed funds futures turn up, lifting rate cut odds, as bond yields, stocks fall
Mon, 19 Nov 2007 21:36 By : Agencies
NEW YORK (Thomson Financial) - Fed funds futures have reversed course to trade higher, as traders reacted to concerns over deterioration in the credit market, just as they had earlier in the bond and equity markets.
December fed funds futures were up 0.015 points to 95.69, which implies a 59% chance that the Federal Reserve will lower its target for overnight rates by 50 basis points to 4% after the next policy setting meeting on Dec. 11. Earlier in the session, the December contract hit a low of 95.645, which implies a 45% chance of a 50 basis point rate cut.
Late Friday, the odds of a cut to 4% stood at 54%.
The yield on the benchmark 10-year Treasury note fell 4.5 basis points to 4.478%. The yield hit an intraday low of 4.045%, the lowest seen since September 2005.
At the same time, the Dow industrials fell 220 points to 12,955, and hit a 3-month low of 12,951.54. A downgrade of Citigroup to sell by Goldman Sachs, which cited concerns over the negative impact of a housing market that is expected to continue to deteriorate, weighed on sentiment.