Bets Emerge on Fed Rate Pause as Stocks Rout Dents Hiking Odds

Traders are scaling back their predictions for how much the Federal Reserve will raise interest rates over the next year as global stocks slide, and some have stepped up with new bets that would benefit from a pause in the hiking cycle beyond December.

In the eurodollar market, there has been flattening across the strip, indicating more caution about the prospects for Fed tightening. A significant wager has emerged in March 2019 options that’s consistent with the U.S. central bank taking a breather from its hiking cycle as soon as that month’s policy meeting, while flows indicate demand for dovish bets on the spread between December 2020 and December 2021 futures contracts, according to rates traders familiar with the transactions who asked not to be identified.