This is the relationship between: 🔵 1-month Treasury yield 🟢 Effective fed funds rate It's the best tool we have to forecast what the Fed will likely do at the next FOMC meeting, on September 17. Especially in combination with the 3M Treasury yield. Right now, the bond market doesn't believe that cuts are coming because the 1M yield is essentially equal to the EFFR. How will we know when a rate cut is likely? When the 1M Treasury yield is 0.13% below EFFR. Why? Because the Fed will cut by 25bps. So if the 1M yield is (0.5*0.25)% below EFFR, then it's officially telling us that it's more likely than not for the Federal Reserve to cut rates in the next month. In plain English, if/when the 1M Treasury yield is at or below 4.205%, then we know that the market is officially pricing in cuts. Right now, the 1M yield is 4.301%.(Caleb Franzen)