Not much changed last week regarding the probabilities of future federal funds rate changes, as estimated from options on federal funds rate futures. Faithful followers of this series may note that we have dropped the option of no change from here through October -- it disappeared from the radar screen entirely -- but other than that it's mostly more of the same. The pictures:
If you look hard you will see just the slightest rise in sentiment for a pause by the time we get through November, coinciding with a sag in longer-term Treasury rates at week's end. No conundrum this time though, as the market appeared to turn bearish on the economy. From CNNMoney:
Treasuries gained Friday as traders bet that soaring oil prices would soon drag on economic growth, brushing off inflation fears that had weighed early in the session...
Higher oil prices were cited as the main factor for the rise in bond prices, reigniting worries sparked Thursday when a reading on retail sales came in weaker than expected and suggested that higher fuel prices may finally be slowing consumers down.
Bonds also rose on news that the University of Michigan's consumer confidence index fell in early August to 92.7 from a final July reading of 96.5 and below Wall Street forecasts of 96.0.
Tomorrow we will get the July consumer price index and industrial production reports, Wednesday the producer price index, and Thursday several indexes of economic activity (from the Chicago Fed, the Philadelphia Fed, and the Conference Board). Could be an interesting week.
Here's the data for the pictures above:
Download October.xls
Download November.xls
Download Imp_pdf_slides_for_blog_081205.ppt
If you are new to this weblog, you can find links to background material on the funds futures options market here and here.