A 25 bps rate cut for September is priced into Fed funds futures currently
The coronavirus outbreak is continuing to spread fear across markets and the latest development sees Fed funds futures move to price in a rate cut by September - previously November - ahead of the FOMC meeting tomorrow.
What is expected to be a dull meeting is now made a bit more interesting with the fact that the US 3-month-to-10-year yields spread is on the verge of inversion - depending on your chart, it may already have - for the first time since October last year (now at ~1 bps).
For some context, that is the key measure that the Fed views for any recession signal as they put more emphasis on that than the US 2s-10s spread.
Expect the coronavirus situation and talks surrounding the yield curve inversion to be the hot topics in question as the Fed meets up tomorrow.
