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Traders Are Baffled Why the Futures Market Is Pricing in Negative Rates

  • Big drops in Libor rates, need to hedge may be factors: FHN
  • Gundlach tweet may have brought topic to fore: RW Pressprich
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Photographer: samxmeg/iStockphoto

The futures market is again pricing in the possibility of the U.S. joining Europe and Japan with negative rates, catching money managers, traders and analysts off guard.

Expectations for the timing of below-zero rates -- as shown by contracts on the Fed funds rate -- shifted to the middle of 2021 after earlier indicating this scenario as soon as December amid dour jobs data that showed the worst employment downturn in U.S. history. But investors are still trying to figure out why markets have so rapidly embraced a theme that’s an anathema to many.