The Big Bond Steepener Is Flopping as the Fed Delays Rate Cuts
- Swaps traders now see first Fed cut most likely coming in June
- Yield curve remains inverted; long-rates are lower than short
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What was supposed to be the darling trade of 2024 has unraveled, thanks to the Federal Reserve upending predictions over how fast it would lower interest rates.
The market entered January aggressively betting on sharp rate cuts. By doing so, traders looked to profit from the US Treasury yield curve returning to a traditional upward slope, a transition known as a steepener. That would put longer-dated yields back above their short-term equivalents, reflecting the usual need to be compensated for risk over time.