Moritz Sterzinger

The Fed vs the Forward Curve

I'd like to share a few facts about USD interest rates. On 10 June, the US Federal Reserve’s funds rate's upper bound was 2.5%, $1 million Libor fixed at 2.41%, and the five-year USD swap rate traded at 1.92%.

Consider the above numbers against the fact that, as recently as November last year, the five-year swap rates stood at circa 3.2%. In other words, the market expected at least two further rate hikes over the course of 2019.