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Traders Brace for Possibility of Five Fed Rate Hikes This Year

  • Half-point Fed move being seen as a possibility for March
  • New Treasury short positions added after Fed policy decision
Updated on

Traders are boosting bets for higher borrowing costs, with money markets now expecting almost five interest-rate increases from the Federal Reserve this year and four from the Bank of England.

Investors are also speculating whether Fed Chair Jerome Powell will front-load hikes by potentially making a rare 50-basis-point move in March, after he struck a hawkish tone at this week’s meeting. The wagers have rippled through markets, driving down short-dated bonds and sending curves toward their flattest since 2020. CME open interest data following Wednesday’s selloff showed a build-up of new short positions across the Treasuries curve as yields surged higher.