Traders Are Starting to Put Big Money on the Fed Going to 6%
- $18 million bet nets $135 million if Fed hits 6% by September
- Wagers on higher peak rate dominate flow in options Wednesday
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A shift in sentiment on Federal Reserve policy is emerging in interest-rate options, where several big wagers on the central bank’s benchmark rate reaching 6% — nearly a percentage point higher than the current consensus — have popped up this week.
The thinking behind them flies in the face of what has been an article of faith over the past two months: that the Fed, after raising rates eight times in the past year, is near the end of its tightening cycle. Already, rates are high enough to cause a recession that will require the central bank to reverse course this year, the thinking goes.