### POV, FUNNY THING HAPPENED.....>

FED FUNDS FUTURES: ### POV, FUNNY THING HAPPENED ON THE WAY TO NEXT FOMC

* Massive volume spike in a sleepy second half Friday trade in an usually sleepy

Fed funds futures:

* At 1210:59ET four sales of appr 25,000 each July Fed funds futures (FFN) at

97.635 (+0.035) knocked out the bid as it traded down to 97.62. The $500B

notional ($5M for 1 contract) trade far and away lead volume on the day (299k in

late trade) as it blew past open interest of 225k coming into the session.

* IMPLICATION: Can only speculate on true reason behind the sale but the top two

reasons:

* Bet there are NO rate cuts between next wk's FOMC and July 31 FOMC (when July

futures expire). Note FFN/FFQ spd has traded a tight range of -0.015 to -0.010

for past month but has extended inversion to -0.040 today.

* Increased chatter over past few wks of a cut in Interest on Excess Reserves

(IOER) by Fed, gains traction as Fed Effective Rate (EFFR) has risen to 2.44%,

4BP over IOER. If EFFR climbs >2.45% that may occur but several swap, prop and

fast$ accts have been fading a cut by selling frontend. New Kid On Block