Traders Increase Bets on 2019 Fed Easing After ISM Slumps

(Bloomberg) -- Traders of fed funds futures boosted the amount of easing they expect from the U.S. central bank this year after American factory activity unexpectedly contracted in August for the first time in three years.

January fed funds futures indicate a rate of 1.485% at the end of 2019, having indicated 1.54% just before the release Monday’s data. With an effective fed funds rate currently at 2.13%, that implies around 64.5 basis points of reductions this year.

The Institute for Supply Management’s purchasing managers index fell to 49.1 in August, weaker than all forecasts in a Bloomberg survey of economists, data released Tuesday showed. Figures below 50 signal the manufacturing economy is generally contracting.

The U.S. 10-year yield extended its advance from earlier in the session and was down about 5.2 basis points on the day at 1.44%. The dollar reversed gains and U.S. stocks extended declines.

To contact the reporter on this story: Alexandra Harris in New York at aharris48@bloomberg.net

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang

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