INSUBCONTINENT EXCLUSIVE:
NEW YORK: A market indicator watched by Fed as one of most accurate gauges of economic health is pricing in lower rates for first time in
more than a decade.
The little-known near-term forward spread, which reflects difference between forward rate implied by Treasury bills six
quarters from now and current three-month yield, fell to -0.0653 basis point on Wednesday.
It was first time since March 2008 gauge -- seen
market participants expect monetary policy to ease, presumably because they expect monetary policymakers to respond to threat or onset of a
Last week, traders priced in no move in Federal Funds rate this year and more than a 50% chance of a rate cut in 2020.
In their paper, Fed
economists said gauge had more predictive power than other long-term spreads, such as differential between two- and 10-year Treasury
bonds.
Still, some investors including Manoj Hemrajani, manager of Macroscope hedge fund, prefer to take their cues from latter
Hemrajani said he anticipates it will turn negative in 2019.
