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Fed futures see higher chance of rate hike

Fed futures see higher chance of rate hike (UST3YR, UST5YR, $DXY, UUP, UDN, FXE, FXY, CUR_EURUSD, C_JPY, TLT, TBT, $TNX, $TYX, UST2YR, UST10Y, UST7YR, UST30Y, JNK, HYG, BND) (by Deborah Levine)

NEW YORK (MarketWatch) -- Interest-rate futures traders increased bets that the Federal Reserve will raise its target interest rate in December from the current low range, after the Labor Department's monthly payrolls report fueled optimism that the job market is improving. The December fed funds contract priced at 99.61 on Friday, down from 99.65 Thursday and 99.72 a week ago. The price of the contract, subtracted from 100, indicates the expected fed funds rate for the month of the contract. So the December contract is pricing in a fed funds rate of 0.39 percentage point, indicating a chance that officials will raise the target rate to 0.50%. The Fed typically moves its target rate in quarter-percentage point increments, while fed funds futures settle at the average price for the month in which they mature. The Fed has kept the funds rate at a range of zero to 0.25% since December 2008.