The link between monetary policy and stock and bond markets: evidence from the federal funds futures contract

Abstract

This study examines the simultaneous response of both stock and bond market returns to changes in the CBOT 30-day federal funds futures rate. It is found that changes in the federal funds futures rate are negatively related to both stock and bond returns. It is also found that positive and negative changes in the federal funds futures rate have symmetric effects on the bond market, but somewhat asymmetric effects on the stock market.