Price moves above 100.00
The rate implied by Fed funds futures for periods in the future, is derived by taking 100.00 and subtracting the price of the contract. So if the price is at 99.50 for a contract (just as an example), the rate implied for that month by the market is 100.00 -99.50 or 0.5%.
The price of the January 2021 Fed funds futures contract just traded above the 100.00 level to 100.005. That implies a rate of -0.005%. The market is not seeing a rebound in yields any time soon and is in fact, seeing negative rates.
Meanwhile, helping the trend in the Fed Funds futures is that the yield in the 2 year note, is trading at a new record low level of 0.1408%. It is getting closer to teh 0.0% level.
Looking at the treasury curve, all yields are lower on the day. The 2-10 year spread has narrow by about 1 base point today to 51.59 basis points versus 52.46 basis points at the close yesterday.
The treasury market – and things like the Fed funds contract – are reflecting safe haven flows and potentially as well expectations for future rates. Given inflation, the inflation adjusted returns on to year notes is negative. The Fed funds contract is anticipating that the Fed may be forced to lower rates below 0.0%.