Bond Traders Double Down on Fed Rate Cut Bets as Hike Risks Dwindle
- Yield curve sharply steepens as market anticipates lower rate
- Investors are betting on easing by year end and more in 2024
Jerome Powell exits after a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, on May 3.
Photographer: Al Drago/BloombergBond traders are waving off protestations that the Federal Reserve might have one more hike up its sleeve and are increasingly convinced that the US central bank’s next move will be to cut its benchmark as recession risks mount.
Treasuries surged Wednesday, led by intermediate and shorter-dated securities, as investors reinforced bets that Fed rates will be lower by the end of this year despite Chair Jerome Powell’s insistence that the central bank’s inflation outlook doesn’t support easier policy. The so-called bull-steepening move took the gap between 5- and 30-year yields to a level last seen in early 2022 even as the Fed lifted its benchmark by a quarter point to a range of 5% to 5.25%.