NEW YORK, April 25 (Reuters) - U.S. interest rate futures fell on Tuesday in a broad bond market selloff as traders saw more than a 50 percent chance the Federal Reserve would raise rates twice more by year end after the first round of the French presidential election on Sunday.
Recent polls showed centrist Emmanuel Macron would beat anti-EU candidate Marine Le Pen in a runoff on May 7, reducing risk the euro zone’s second-biggest economy would follow Britain to leave the regional economic bloc.
Some traders had feared that a run-off between Le Pen and far-left Jean-Luc Melenchon, who is also known for his anti-EU stance, would spell the end of the European Union and the euro. The possibility of such a disruptive outcome for the European economy could prevent the U.S. central bank from raising rates further.
With a likely Macron victory next month, the Fed may be able to stick its intention to raise rates two more times in 2017 following its quarter-point increase in March, analysts said.
In early trading on Tuesday, federal funds futures implied traders priced in a nearly 71 percent chance the Fed would raise rates to a range of 1.00-1.25 percent at its June 13-14 policy meeting, versus 67 percent late on Monday and about 53 percent on Friday, CME Group’s FedWatch tool showed.
Fed funds futures suggested traders saw a 51 percent chance the Fed would hike rates to 1.25-1.50 percent at its Dec. 12-13 meeting, compared with 48 percent on Monday and roughly 38 percent on Friday, according to CME’s FedWatch.
Reporting by Richard Leong; Editing by Meredith Mazzilli