Interest rate expectations
I am currently facing an unrealized loss position with my late August US interest rate futures bet; while my trade was placed at 2.2%, it is currently at 1.74%.
Unfortunately, both the markets and myself have now ratcheted down future interest rate speculation.
I am now of the opinion that US rates by the end of 2010 will be no higher than 1% and will most likely be 0.5%. I am also of the opinion that by mid-year 2011 that the rate will most likely be around 1-1.5%.
These are under existing market rates, and thus I will be attempting to close my position at an opportune moment. Usually the opportune moment comes when some piece of news floods the market with respect to an outperformance in the US economy, or some federal reserve official spouting off above when interest rates will rise again.
In Canada, it is evident that rates will be increasing slightly in mid-2010, but I do not expect rates to go higher than 1% by the end of 2010. It will most likely be around 0.5% and will be in lock-step with the US federal reserve.