100% — that’s the probability of an interest rate cut at the next scheduled Federal Reserve Open Market Committee Meeting on March 17-18, 2019, according to the current market implied rates in Fed Funds futures. As of the close on Friday, there were 1.5 cuts priced into that meeting (about 35 basis points).
The 2-year U.S. Treasury, the most policy sensitive major benchmark bond, ended the week at its lowest yield since November 2016. At that time the Fed Funds target band was 0.25/0.50% versus the current 1.50/1.75% band. Fed Chairman Jerome Powell issued a statement on Friday saying that, although “the fundamentals of the U.S. economy remain strong,” the Fed is “closely monitoring developments and their implications for the economic outlook” and that the Fed “will use our tools and act as appropriate to support the economy.” His words, however, did little to arrest the rout on major Wall Street indices. The S&P 500 (SPX) ended the week down 11.5% — in its worst week since 2008.