Eurodollar Futures

I thought it was time to put my rate hike estimating tool to bed, but it looks like I'm back in business.

Here is what the curvature of the Eurodollars futures market is saying about future rate movements.

The next expected rate hike has dropped back to late 2017, but it is moving around a lot.  There is a lot of uncertainty.  The previous rate hike certainly did help meet the Fed's goal of keeping risk premiums high.  Macroprudence!

Coming movements in the yield curve should be telling.  Right now, I would say that the yield curve is close to being inverted, if we adjust for distortions from the zero lower bound.  But, it's not too late.  A reversal in the rate hike would be the least I would hope to expect in a sane world.  But, maybe we can move forward in any case, depending on how things develop.

In this second graph, we can see that the length of time between now and the expected next rate hike has spiked, but it isn't as long as the length of time that was expected before and during QE3.  If the yield curve flattens more, I don't expect things to turn out well.  But, maybe there is a chance that positive real economic growth can manage to salvage normalcy.  Of course, as always, mortgage expansion would solve all of this much more effectively than marginal rate changes.

(The gaps in the graphs reflect the period where the model was dormant because the curvature of the yield curve at the short end had disappeared.)