Fed Stuck at Zero Into 2015 Seen in Swaps, QE Odds Reach 99%
Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.And from MarketBeat:
Bond market measures from overnight index swaps, which indicate no increase in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008....MUCH MORE
...A gauge of indicators of market expectations for additional central bank stimulus rose to a record 99 percent in August, according to Citigroup Inc. The measure increased to 82 percent in the months before QE2 in November 2010....
UBS: Bernanke Will Unleash QE3 This Week
QE3? You bet.
More and more market prognosticators are calling for the Fed to unveil a third round of quantitative easing this week UBS is the latest to join the fray, predicting the Fed will announce something big on Thursday following its policy meeting.
“We now anticipate an announcement of another round of quantitative easing at the FOMC meeting on Sept. 13,” UBS economists wrote in a note to clients.
The QE3 parameters will likely entail a six-month program of at least $500 billion, primarily focused on buying Treasurys, UBS predicts, while also anticipating the Fed will extend its ultra-low rate guidance into 2015.
UBS joins a growing chorus of investors who are anticipating less talk and more action from the Fed after its two-day meeting this week, which ends on Thursday with a statement and press conference from Fed Chairman Ben Bernanke....MORE