The might hike rates a few times but the market is losing confidence that the dawn of an extended rate hiking cycle is near.
If you look out to the March 2017 eurodollar futures curve, the market just can’t shake that feeling that rates hikes will stall after about 125 bps of tightening.
Even after the rebound from the rout in October, the long-term interest rate derivatives market has never recovered.
March17 3 month eurodollar future (higher implies a lower Fed rate)
Specs are also beginning to give up on rate hike bets. The eurodollar net position flipped to long two weeks ago for the first time since 2013, Reuters notes.