[MathsOX]

>That was really really dumb. They should have gone from 0.25 to 0.3 or something.

That's not how interest rate setting works at all. Plus, the Fed is still using a banded window that encapsulates your five basis point rise.

What company is borrowing at Fed Funds rates? If - theoretically, because we have to be quite theoretical to operate under your assumptions - a company was that exposed to interest rates and had zero hedge against interest rate vol they would not have the credit to hope to get funding anywhere near Fed Funds rates.

If you're surviving at the edge of loans (i.e - you're in a potential distressed scenario) you'll have bonds trading at a significant discount. This is exactly what began to happen during the early part of 2015, when Fed Fund futures had little chance of the Fed moving priced in.