Traders see a reduced likelihood that the Federal Reserve will be able to hike by December or January, as tensions flared in the Middle East on Friday. Fed funds futures now see the chance of a 25-basis-point hike by December at 20.5%, down from 29.9% a day ago, and by January at 27.8%, down from 34.8% on Thursday, according to the CME FedWatch Tool. Instead, traders now see a 79.
2% and 69.4% likelihood, respectively, for each month that the Fed will leave rates on hold, which would keep the fed funds rate between 5.25%-5.55%. They also see a 98.5% chance of a pause on Nov. 1. The policy-sensitive 2-year Treasury yield fell 7.4 basis points to 5.097% Friday morning, a day after Fed Chairman Jerome Powell left the door open to the possibility of further tightening.