Fed rate move bar chart as of 3pm on May 21st. WTF is going on here???

[DcifrThs]

sorry for the screen shot but i dont' know how else to get it to you guys.

the left most column is the date of each fed meeting from now until the end of the year. the line item "Current" means the probabilities for each move as of 3pm today. obviously the line items 1 week ago and 1 month ago mean just that.

so how is it possible that a hike to 5.5% has a 35.9% probability for the october 31st meeting, but no other significant probabilities of that rate ever being touched at any other meeting?

there are a ton of weird things going on with this.

I got this data from bloomberg by typing in FFIP<GO>

sometimes it doesn't even give you a line item for 4.75 % (as with the 8/7/2007 group).

very strange.

anybody have any experience with this?? i'm thinking there are some serious trading opportunities in the fed funds futures or options market.

thanks,
Barron

[plj8624]

Don't know if this is relevant but your 10/31 current and one week ago percentages don't add up to 100%. They are about 94 and 91.

I don't know how to trade this but as you pointed out the 10/31 data seems inconsistent with the 12/11 percentages. There ought to be opportunity.

Are we sure the data is accurate?

[DcifrThs]

[ QUOTE ]
Don't know if this is relevant but your 10/31 current and one week ago percentages don't add up to 100%. They are about 94 and 91.

I don't know how to trade this but as you pointed out the 10/31 data seems inconsistent with the 12/11 percentages. There ought to be opportunity.

Are we sure the data is accurate?

[/ QUOTE ]

yea i know they don't add up to 100%> i was thinking of simply attributing the ones that don't add up to 100% to the missing rate move slot. but i figured there was something i'm missing.

the data is accurate. it is straight from bloomberg. you can check it yourself by going to a bloomberg terminal and typing in FFIP <GO>

i also have to research how to profit from this in the derivatives mkt because from what i gather, the fed funds futures are dated so that when the rate move is announced, the previous period's cash flow of the face value * the interest rate is deliverable i think.

i'd want to be able to sell (or buy back) the security at a profit after the rate is announced and not have to execute the delivery... i'm sure it's possible and i may be misunderstanding the logistics of the fed funds futures contract so i'll do some more reseach there.

then of course, there are options on those futures contracts, but i think the futures contract is the way to bet on this.

Thanks,
Barron

[KDuff]

What sort of trading volume do these back months have right now?

[DcifrThs]

[ QUOTE ]
What sort of trading volume do these back months have right now?

[/ QUOTE ]

don't know. i'm probably gunna go stop by today again around 3pm and check to see if the probabilties moved and make another quick chart.

while there i'll try to find the actual securities i'd need to trade to take a position & check the volume.

good thought,
Barron

[NajdorfDefense]

by your data, prob of 25bps cut has dropped by 30%. That has to land somewhere. If your data is right, someone's been setting up a trade idea in the futures. Std.

[DcifrThs]

[ QUOTE ]
by your data, prob of 25bps cut has dropped by 30%. That has to land somewhere.

[/ QUOTE ]

right, and in all instances other than the 10/07 meeting, the decrease in a move to 5.00 was then attributed to the rates being held steady at 5.25.

for the 10/07 meeting though, the 30% drop of probability of a move to 5.00 went directly to 5.50 vs. 5.25. i don't understand how that happened?


[ QUOTE ]
If your data is right, someone's been setting up a trade idea in the futures. Std.

[/ QUOTE ]

what do you mean by this? can you explain it in depth?

thanks,
Barron