Hottest Bond-Market Wager Targets 2% Interest Rates for 2023
- Wave of dovish SOFR options plays emerged beginning last week
- Trades specifically focused around 98.00 strikes, or 2% rate
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Heads are turning in the rates market as traders pile into positions that stand to benefit from a dramatic reversal in Federal Reserve monetary policy.
The wager involves options tied to Secured Overnight Financing Rate futures over multiple tenors for next year and into 2024. Over the past couple weeks traders have been active in call spread structures focused on 97.00 and 98.00 strikes, equating to policy rates of 3% and 2%, respectively.