Bearish Momentum Sweeps Through US Rates Market Just Before Fed
- Trader hedges scenario that Fed opts for 50 bps hike Wednesday
- JPMorgan Treasury clients most short since start of December
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While swaps tied to the Federal Reserve’s benchmark interest rate show a near 90% probability that the central bank announces a 25 basis-point rate hike on Wednesday, traders are leaving nothing to chance.
Monday saw two big trades in federal funds futures that would pay out if the central bank opts to surprise with a 50 basis-point rate hike instead. And the latest weekly positioning data from the Commodity Futures Trading Commission showed asset managers have been closing out long-duration positions, while hedge funds have extended a net short position in 10-year Treasuries to multi-year lows.