Bond Traders Wager on Slower Pace of Fed Tightening: Chart

After lackluster U.S. retail sales and inflation data on April 14, as well as heightened geopolitical concerns, the bond market is skeptical the Federal Reserve will raise interest rates another two times in 2017, as forecast by central bank officials in the so-called dot plot. Implied rates on the fed fund futures curve are fully pricing in a September rate increase, with about a 22 percent chance of another by year-end, according to BMO strategists Ian Lyngen and Aaron Kohli. “Despite criticism of the Fed’s March rate hike, they certainly now look very prudent to have put at least one rate hike on the books this calendar year before the series of risks and economic headwinds picked up,” the pair wrote Monday.

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