Fed Rate Doubts Have Options Traders Covering Both Hikes and Cuts
- Bond traders hedging against tail risks of higher, lower rates
- Currency markets eyeing both Fed meeting, Bank of Japan
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Treasury options traders are protecting against everything from multiple interest-rate cuts this year to a hike ahead of the US Federal Reserve meeting this week.
Recent inflation data has remained stronger than had been expected, dimming expectations that the central bank will cut rates any time soon. While short positions in Treasury futures extended last week as yields pushed through fresh yearly highs, options flow has suggested growing uncertainty around the path of the Fed’s monetary policy for this year, with a number of deep out-the-money tail-risk hedges appearing across a number of tenors.