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February 13, 2006

Betting On Ben, Market Version

How high will we go?  The market speaks, and it speaketh at least another 50 basis points.  Here are the  probabilities for the next two FOMC meetings, based on the usual Carlson-Craig-Melick estimates from options on federal funds futures:

   

March_11


May_9      

Just for reference, here's the latest from the Treasury market:

Bonds fell Monday as traders prepared for possibly hawkish congressional testimony from new Federal Reserve Chairman Ben Bernanke.

The benchmark 10-year note declined 2/32 to 99-8/32 to yield 4.59 percent, little changed from the previous session. The 30-year bond declined 9/32 to 98-26/32, yielding 4.57 percent, up from 4.56 percent late Friday...

Bernanke is scheduled to testify before the House Financial Services Committee Wednesday, his first public appearance to discuss the economy and monetary policy since becoming the head central banker.

Speculation is swirling that the Fed will continue to raise interest rates to stem inflation in the face of high energy prices and a strong economy...

Swirling indeed.

If you like, the data:
Download Imp_pdf_slides_for_blog_021006-1.ppt
Download implied_pdf_march_021006.xls
Download implied_pdf_may_021006.xls

February 13, 2006 | Permalink

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Listed below are links to blogs that reference Betting On Ben, Market Version:

» The Bernanke era begins from Econbrowser
New Fed Chair Ben Bernanke provided his first testimony before Congress this morning. [Read More]

Tracked on Feb 15, 2006 1:14:36 PM

Comments

Ironically, I think that after the dust settles, the market may rally after fed comments, assuming they are hawkish.

Since we are expecting more rate increases, and the data released today bear that out, the market will rally when expectations are met. More inversion. tens will outpace the twos and fives.

Posted by: jeff | February 14, 2006 at 10:01 PM

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