September 1, 2015 / 2:28 PM / 2 years ago

MONEY MARKETS-U.S. rates futures hit session highs after Aug ISM

NEW YORK, Sept 1 (Reuters) - Some U.S. federal funds futures rose to session highs on Tuesday as a measure on U.S. manufacturing activity fell more than expected, implying traders raised their bets the Federal Reserve would raise rates even more slowly than they had previously thought.

The Institute for Supply Management said its index of national factory activity fell to 51.1 from 52.7 the month before, marking the lowest reading since May 2013. It fell short of the forecast 52.6, according to a Reuters poll of economists.

Fed fund futures for 2016 delivery added to earlier gains following the latest ISM U.S. factory report. They were mostly up 0.5 to 4.0 basis points from Monday’s close.

The 2015 fed funds contracts were flat, suggesting little change in the view among traders on timing whether the Fed would raise interest rates by year-end.

The Dec fed funds contract implied traders see a 60 percent of a rate hike in December, little changed from Monday, according to CME Group’s FedWatch program.

Reporting by Richard Leong; Editing by Chizu Nomiyama

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