FoundationsMAD Academy0:44Macro

The Rate Everything Else Is Priced From

The fed funds rate is what banks charge each other overnight, and it is the anchor for every other rate in the system.

0:44 · 6 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00It is the rate banks charge each other to borrow overnight. Nothing more.
  2. 0:05A target, not a decree. The Fed sets a range and uses its own tools to keep the market rate inside it.
  3. 0:14Why one overnight rate matters so much. Everything else is priced as a spread over it, out along the whole curve.
  4. 0:23Basis points. A hundred basis points is one percent. Twenty-five is the usual step.
  5. 0:31What already happened before the meeting. Markets price expected moves in advance, so the surprise is what actually matters.
  6. 0:39The level matters less than the distance from what was expected.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
The Rate Everything Else Is Priced From — MAD Academy Training Video · MadStockAlerts