Traders Keep Bets on Negative Fed Rate in 2021: Liquidity Watch
- Futures stick to wagers even after Powell’s pushback
- Treasury issuance starting to weigh on front-end spreads
This article is for subscribers only.
Traders held onto bets that the Federal Reserve will drop rates below zero next year after Fed Chairman Jerome Powell said the policy isn’t something officials are looking at, though he stopped short of ruling it out as an option.
Implied rates on fed funds futures contracts show the central bank’s policy benchmark dropping below zero by the second quarter of 2021, little changed from before Powell’s comments. Many strategists have attributed the pricing, which has emerged since last week, to bank hedging, rather than a bold wager the U.S. central bank will take its key policy rate negative.