What will central bankers do next?
New Interest Rate Probability Tracker Gives Away 2 Little Known Secrets Hidden Inside the Bloomberg Terminal
Get trade opportunities and institutional confirmation
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Secret #1: Institutions know the exact probability of a rate move
= trading opportunities
As of this writing, the Reserve bank of New Zealand is expected to cut rates by 50 basis points. You can see this in any common retail calendar:
Now if you had access to the Bloomberg terminal ($32,000 per year) you would know that there is actually an 84% chance of a 50 basis point cut, not a 100% chance which a retail calendar leads you to believe.
Professional interest rate trackers use data derived from the STIR markets to come up with this “84%” number.
This means that 14% of the market will be surprised if the RBNZ cuts by 50 basis points and 86% of the market will be surprised if they only cut once at 25 basis points or don’t cut at all.
Surprised traders who need to liquidate their positions on the announcement equals a great move out of the event.
Professional traders have access to this data in real time alerting them to show up and trade this central bank rate decision because they might get a great move.
In the context above, professional traders will be even more interested in the Bank of Canada Rate Decision on March 12th. Why?
Because the expectations between a hold and a cut are nearly split. This means that whatever the decision is – half of the traders in the market will need to unwind their positions leading to a great move out of the Rate Decision Event.
Secret #2: Institutional traders get confirmation that a move will continue or fade
A retail trader will sit down at their desk and be watching the GBP/USD. They have lots of indicators on their charts, big dreams and have done their morning meditations and journaling.
Suddenly the pound starts moving down by about 40-50 pips based on a comment by Bank of England governor Bailey.
The more eager retail trader jumps quickly into the market hoping to catch a bit of a spike upward. But then the spike starts to fade and they get stopped out and decide “news trading” isn’t for them.
The more disciplined retail trader finds a nice level of support and waits for price to pull back and enters long. But price crashes right through their support level after hesitating at the level for a few minutes.
Both scratch their heads wondering what happened.
A professional trader sees the same move and immediately checks to see if the probability of a rate hike just increased based on those comments.
He pulls up his interest rate tracker and notices that the odds of a rate cut have not changed at all. They have stayed constant at 25%.
He decided to pass on the trade because there was no confirmation that this comment by governor Bailey really meant anything substantial to the market.
We see this happening over and over again, the interest rate probability tracker acts as confirmation that the move will continue, that a level of support and resistance will hold or if the move might fade…all based on what the STIR market interest rate probabilities tell us.
There are also a couple bonus features that institutions have right at their fingertips:
#1. They get interest rate probabilities on all the 8 major central banks. This retail tool doesn’t even exist in the market today. If you wanted to get the probability of the RBNZ’s next move you wouldn’t be able to find it.
#2. Institutions can see the full yield curve. So you can see how expectations are changing further out – perhaps some data has been released and it does not change near term expectations at all, but it radically changes medium and longer term interest rate expectations – that’s what the yield curve can show you. Check out this example from the Swiss National Bank.
Remember if the interest rate probabilities change for the next rate decision or change down the road, this is excellent confirmation that a move will continue or dips will be bought because the interest rate market is confirming the market’s move.
#3. Institutions can see rate expectations building day by day. Take this example from the bank of Japan. We could see interest rate expectations rising into the 24th of January.
Each day there was a steady rise. How does this help your trading? if you know these expectations have been increasing for weeks – a single contrary comment from the BOJ can cause these expectations to be unwound causing a big price move.
If you have been trading without an interest rate tracker and have got caught out, you need to level the playing field and get some of the tools that the professionals are using.
If you sign up below, you’ll get the financial source interest rate tracker for all 8 major central banks, so you can see the probability change continuously updated.
You’ll get the full yield curve analysis on each of the 8 central banks plus daily rates chart.
We pay thousands of dollars each month for developer costs and data feeds – so you don’t have to purchase the Bloomberg terminal. We just ask for $29 to contribute to help offset our data costs!
if you want to try it out for a month, just click below and get access immediately.
Get a Professional Interest Rate Probability Tracker
- Continuously Updated Interest Rate Probability Tracker
- Coverage for 8 Major Central Banks
- Full yield curve visibility
- Day-by-day expectations
We pay thousands of dollars each month for developer costs and data feeds – so you don’t have to purchase the Bloomberg terminal. We just ask for $29 to contribute to help offset our data costs!