Traders Dial Back Expected Fed Rate Cuts as Recession Risks Ease
- Policy-sensitive futures are implying fewer rate cuts for 2024
- Moves matched in options, where traders eye risk of high rates
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As traders push up long-term bond yields on speculation the economy will avert a recession, they’re also dialing back expectations for Federal Reserve rate cuts. There’s around 100 basis points of easing now priced into the swaps market through next year, down from more than 150 a few weeks ago.
In options pegged to the Secured Overnight Financing Rate, a popular trade over the past week has been hedging the risk that interest rates will stay elevated through next year.