MARKET TALK: Traders Price In Late 2013 Funds Rate Increase

Fed-funds futures traders expect FOMC to start raising funds rate late next year, about a year sooner than the central bank's own timeframe for beginning to lift the yield from very low levels. Fed members' acknowledgment that the economy is picking up fuels current sentiment, as November 2013 fed-funds contract prices in 92% chance for committee to raise rate to 0.5% at that month's meeting. Market priced in 82% chance Monday and only a 34% chance a week earlier. Longer-dated contract fully priced for 0.5%, with 44% chance for further tightening to 0.75% at the late January 2014 FOMC meeting. FOMC has held funds rate near zero since December 2008.