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Traders Are Certain the Fed Will Cut in July, But Unsure What’s Next

  • Powell’s testimony will be scrutnized for clues on rates
  • Treasury 2-year yields have risen over 20bps from June low
Bloomberg business news
If Powell fails to confirm that rate cuts are coming, some strategies may flounder. Bloomberg’s Dani Burger reports.(Source: Bloomberg)
Updated on

Lurking beyond traders’ apparently unwavering confidence that the Federal Reserve will cut interest rates this month is a more nebulous outlook about what the central bank will do after that.

Traders are still pricing a full quarter-point reduction in July, yet they have slowly scaled back views on how much easing will take place for all of 2019 -- lowering expectations to 64 basis points from around 80 basis points two weeks ago. At the same time, options traders are still adding to bets the Fed will embark on a series of cuts, rather than a one-and-done approach.