Is the Fed Behind? Bond Traders Bet on Big Rate Cuts Just in Case
- Outlier wagers center on half-point reduction by September
- Labor data in focus as Dudley, El-Erian argue for easing now
The Marriner S. Eccles Federal Reserve building in Washington, DC.
Photographer: Moriah Ratner/BloombergThis article is for subscribers only.
Bond traders who’ve set themselves up for gradual interest-rate cuts starting in September are ramping up side bets in case a sudden slide in the US economy forces the Federal Reserve to be even more aggressive.
As Treasuries advance for a third-straight month, investors are fully pricing in at least two quarter-point rate reductions this year, slightly more than what policymakers have telegraphed. In the derivatives market, some traders have gone even further with wagers that pay off if central bankers go bold and deliver a half-point cut in mid-September — or start lowering rates sooner.