Revived Hike Chatter Fuels Higher-for-Longer Options Wagers
- Positioning in similar-style hawkish SOFR trades has ballooned
- Fed’s Kashkari said rate hikes can’t be entirely ruled out
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Options traders are piling into bets that the Federal Reserve will keep rates higher for longer as they grow increasingly more hawkish than their counterparts in the swaps market.
It’s a wager that began attracting attention in March, when a slew of surprisingly strong readouts on growth and inflation hit. But the bet’s grown substantially since then, reinforced by data earlier this week showing US consumer confidence unexpectedly rose in May. It’s the latest indication that the options market expects the US central bank to stay the course — or even raise rates over the next year.