Forward Guidance has created a new designer drug for the pocket protector crowd - bets when FG will change. Deferred Eurodollars have dropped about 20 ticks since our post last Monday on language change. As Matt Boesler points out today on BBG, the herd is buying puts.
This shows the failure of FG at the Fed. Prodding the market to "price out" any probability of change has led to a massive pass line bet on that inevitable change. The Fed now can either "pay the line" or create a communal bummer around the table. The sad truth is the futures strip no longer provides insight to the Fed about participant expectations. Mathletes and Quants spend their days calculating the cost of wagering on a word change. American exceptional-ism on parade.
One thing everyone, including the Fed, knows: When they do change, the market will over-react. And the crack heads will make another bet.