Odds of a March rate hike by the Federal Reserve are back above 50%


Traders are back to pricing in a better-than-50% chance that the first rate hike by the Federal Reserve will arrive in March, as the first trading day of the year kicked off with renewed optimism that rising COVID-19 cases may have a more limited economic impact than previously thought.

 Data compiled by the CME Group Inc. shows the odds of a March liftoff at almost 54% as of Monday, up from 50% on Dec. 31. Monday’s almost 54% likelihood is similar to what was priced in a week ago — when the 2-year Treasury yield

TMUBMUSD02Y, 0.781%

, or the rate most associated with the near-term path of Fed policy, hit a nearly two-year high. Traders saw only a 26% chance of a March rate hike on Dec. 3.

Investors’ improved optimism about the outlook was reflected in rising Treasury yields across the board on Monday, with the 10-year rate

TMUBMUSD10Y, 1.622%

climbing to the highest level in more than a month. Investors sold off Treasurys in early Monday trading amid studies showing the omicron variant to be less severe than other variants, despite rising hospitalizations.

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“Treasuries are catching up to a tighter Fed reality,” wrote Ben Emons, managing director of global macro strategy at Medley Global Advisors.

Also on Monday, U.S. stock benchmarks

DJIA, +0.18% SPX, +0.22%

saw choppy action, though the Nasdaq Composite Index

COMP, +0.75%

was buoyant in 2022’s first trading session.

Source: Marketwatch

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